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Summary:

Niklas Zennstrom has resigned as CEO of Skype, but will become non-executive chairman of the company’s board. Michael van Swaaij, eBay’s (EBAY) chief strategy officer, has been appointed interim CEO until a replacement is found. eBay also announced that it has paid EUR 375 million (approximately […]

Niklas Zennstrom has resigned as CEO of Skype, but will become non-executive chairman of the company’s board. Michael van Swaaij, eBay’s (EBAY) chief strategy officer, has been appointed interim CEO until a replacement is found.

eBay also announced that it has paid EUR 375 million (approximately $530 million) to settle all of its future obligations under the earn-out agreement signed with certain Skype shareholders when eBay acquired Skype in 2005.

Clearly, Skype’s master plan wasn’t working, and revenue targets that were supposed to determine the earnouts weren’t met. So instead of a billion-dollar-plus earnout, Zennstrom and co-founder Janus Friis will have to settle for $530 million. Boo-hoo.

eBay is going to take an impairment charge of around $1.43 billion. eBay had bought Skype in 2005 for roughly $4 billion — $2.6 billion up front, with the rest as an earnout.

One expensive Skype adventure, don’t you think? The outcome shouldn’t come as a surprise; we have been reporting on the chaos at Skype for months. eBay clearly botched up this deal. For Niklas this is a good time to go — he has a growing portfolio of companies he has invested in via his fund, Atomico. He tried to fix things at Skype after he took back control in December 2006, but things haven’t worked out according to plan.

Interestingly, Skype’s President VP of operations, Michael Jackson, wasn’t tapped as the CEO or even as acting CEO. He is the man who has been running the shop for a long time. Why not? Is it because he is going to leave as well, and start a company of his own…a new play in the mobile payments arena, perhaps?

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  1. whose idea was to buy skype? who got fired? the skype guys obviously go, but they are now rich. whom at ebay will take responsibility for one of the stupidest acquisitions ever?

  2. Om Notice the same day Niklas stands down as Skype’s CEO Joost luanches publicly.

    I think Niklas would rather work on Joost than Skype and his and Janus’s 2 year agreement with eBay finished .

    Skype has had a rough time recently with the network outage but I think it can survive the VOIP wars .

  3. never quite understood the motivation for ebay to buy skype? Meg Whittman’s prob not gonna take the fall here…

    At least a deal like this might help caution other companies from throwing crazy money at the next “big thing” cough…faceboo….

  4. Ian Andrew Bell Monday, October 1, 2007

    Michael doesn’t strike me as the sort who wants the hassle of being CEO, so I wouldn’t be surprised to learn that he turned the gig down.

    As the only team-member who knows anything about telecom, he has been the main oarsman at that business for some time. His credits include SkypeOut and most of the other paid services.

  5. Quote from:
    http://bits.blogs.nytimes.com/2007/10/01/ebays-4-billion-lesson-in-the-value-of-hype/

    “Here’s a suggestion to every Internet executive: take a Post-It note, write “EBay wasted $3 billion on Skype” and stick it to your monitor. Stare at it the next time some hot social whatever-2.0 company comes by and talks about growing fast and finding a revenue model later.”

  6. If you were Michael Jackson would you want to take over as CEO at this point? I doubt it.

    Skype will either be spun off/sold or made just a little division within eBay. The independent little company that could is long gone.

  7. Satish Sharma Monday, October 1, 2007

    Skype’s business model (is)was fundamentally flawed.

    Adding subscribers will constantly reduce calls that generate revenue and if everyone in the world were to get skype, it will have zero revenue.

    There is a critical point beyond which having to maintain infra-structure costs a lot more than revenues. With 220 Million accounts, my calculation says that Skype reached that point a while ago !!

    Most businesses would love hockey stick growth, skype would collapse even if it hit halfway!

    The management & VCs sold out at a good time.

    As PT Barnum said .. there is sucker born every minute.

  8. Maybe the Skype guys were busy with their own venture capital outfit, Atomico…

  9. This time next year we’ll be saying “who was the idiot at Google responsible for the youtube purchase decision”. Okay, Youtube is a much better buy than Skype and for far less, but how long before it makes up the $1.6B and untold losses it is incurring every day?

  10. Skype loses its hype Tuesday, October 2, 2007

    [...] Yesterday, Forbes reported on eBay’s continuing problems with Skype. Om Malik also discussed this development yesterday. [...]

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