Skype Departures Result of Inflated Sales Price, Says Analyst

What’s next for Skype now that its two co-founders have stepped down? The answer to that question isn’t entirely clear but speculation abounds. The event itself, however, didn’t surprise analysts at research firm Ovum.

Niklas Zennstrom and Janus Friis this week left their executive posts at Skype, which for the past two years has been owned by online auction giant eBay Inc. Skype made its name on providing free peer-to-peer VoIP services and made its money on computer-to-landline connections. Two years ago, eBay bought Skype for an eyebrow-raising $2.6 billion. As Mark Main, senior analyst for Ovum put it, “eBay overpaid for Skype and we think this confirms it.”

Zennstrom and Friis now are free to focus on Joost. Joost is their online TV site that features programming from channels including CBS, VH1, Comedy Central and CNN (there’s also retro content like ‘GI Joe’ and ‘Transformers’ to give you some real ’80s flashbacks). Industry observers have known for some time that Zennstrom and Friis want to dedicate their efforts to Joost — now they have the opportunity.

The resignations came as Skype growth slowed, even though the brand still is generating revenue, Main said. The problem is that Skype hasn’t produced the business boost eBay had expected, he added.

“On top of the slowdown in revenue growth, total customer growth measured by registered users is slowing down,” Main said. “More worryingly is that growth in Skype's actual daily usage is weakening.”

However, weekend usage remains strong, presumably as people have time away from work to catch up on personal calls.

The trick now is for eBay to keep Skype services attractive, said Main. It’s not clear how eBay and Skype plan to do this — the industry rumor mill says Skype could go mobile, although that presents new challenges of its own (for example, why would users pay extra to connect to a free service when they already pay for cell minutes?). eBay originally wanted to make Skype a part of its auction services. The idea was that users could call one another on the P2P network — potential buyers could ask questions of auctioneers, rather than waiting for e-mail responses. That integration hasn’t fully materialized, though.

In the meantime, Michael van Swaaij, Skype’s chief strategy officer, will serve as CEO until a permanent successor is named.

eBay also will take an impairment charge of $1.43 billion in its third quarter and pay an earn-out agreement of about $1.7 billion based on Skype's number of active users, sales and gross profit targets in 2008 and the first half of 2009.

The Skype news this week is another in a line of setbacks for the IP industry. Vonage Holdings Corp. was dealt yet another legal blow last week when a court found it had infringed on some Sprint patents. A jury earlier this year said Vonage was illegally using patents owned by Verizon Communications Inc. as well. There’s also the sudden SunRocket shutdown.

eBay Inc. www.ebay.com
Joost www.joost.com
Ovum www.ovum.com
Skype www.skype.com
Sprint www.sprint.com
Verizon Communications Inc. www.verizon.com
Vonage Holdings Corp. www.vonage.com

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