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EBay Takes $1.43B Charge for Skype
[October 01, 2007]

EBay Takes $1.43B Charge for Skype

(AP Online Via Thomson Dialog NewsEdge) SAN FRANCISCO_EBay Inc. announced Monday that the co-founder and chief executive of its Skype division was stepping down, and that the parent company would take $1.43 billion in charges for the Internet phone service division.

Of the charges to be taken in the current quarter, $900 million will be a write-down in the value of Skype, eBay said. That charge, for what accountants call impairment, essentially acknowledges that San Jose-based eBay, one of the world's largest e-commerce companies, drastically overvalued the $2.6 billion Skype acquisition, which was completed in October 2005.

EBay also said Monday it paid certain shareholders $530 million to settle future obligations.

In 2005, eBay wooed Skype investors by offering an "earn-out agreement" up to $1.7 billion if Skype hit specific targets _ including a number of active users and a gross profit _ in 2008 and the first half of 2009. The Skype shareholders holding those agreements received the $530 million in an early, one-time payout, eBay spokesman Hani Durzy said.

EBay also announced that Skype CEO Niklas Zennstrom will become non-executive chairman of Skype's board and likely spend more time working on independent projects.

Durzy said the resignation of Zennstrom, a Swedish entrepreneur who started Skype, was not related to the impairment charge or Skype's performance.

"Niklas left of his own volition," Durzy said. "He is an entrepreneur first and foremost, and he wanted to spend more time on some of his new projects that he has been working on."

Skype, which allows customers to place long-distance calls using their computers, reported second-quarter revenue of $89.13 million, up 102 percent from a year ago. It was the second consecutive quarter of profitability for the newest eBay division.

Zennstrom is likely to work on developing Joost, an Internet TV service he started in 2006 with Skype co-founder Janus Friis, relying on peer-to-peer technology to distribute TV shows and other videos over the Web.

Joost had at least 1 million beta testers in July and will launch at the end of the year, Zennstrom said earlier this summer.

One of the pair's first collaborations was the peer-to-peer file-sharing network KaZaA, which launched in March 2000 and is used primarily to swap MP3 music files over the Internet. Zennstrom also co-founded the peer-to-peer network Altnet and the venture capital firm Atomico.

EBay chief strategy officer Michael van Swaaij, formerly vice president for European operations, will serve as acting Skype CEO until a replacement is named. EBay hired Russell Reynolds Associates to search for replacements.

EBay also announced Skype President Henry Gomez will return to eBay as senior vice president for corporate affairs. Gomez was eBay senior vice president during his two years at Skype.

EBay shares rose 83 cents, or 2 percent, to $39.85.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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