Will Joltid Turn eBay's Dream of a Skype IPO Into a Nightmare?

It was in a conversation with Skype CEO Josh Silverman last fall that I raised the question: When will eBay (s EBAY) spin off the mammoth Internet calling service via a public offering? Of course, he didn’t answer the question. The answer to that question came today, when eBay CEO John Donhaoe announced that Skype will have an IPO, sometime in 2010. Making the announcement and admitting to Meg Whitman’s $3.1 billion blunder, Donahoe said:

“But it’s clear that Skype has limited synergies with eBay and PayPal. We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential. This will give Skype the focus and resources required to continue its growth and effectively compete in online voice and video communications. In addition, separating Skype will allow eBay to focus entirely on our two core growth engines—e-commerce and online payments—and deliver long-term value to our stockholders.”

eBay management has been under tremendous pressure to do something about Skype. Wall Street has been clamoring for some sort of a resolution for a business that had sales of $551 million in 2008 and ended the year with 405 million registered users. Skype expects to top $1 billion in revenue in 2011, nearly double its 2008 revenues. Despite that, the company has been unable to find a buyer who would pony up around $1.4 billion, eBay’s asking price. With Silverman in charge, under normal circumstances, a Skype IPO would be a slam dunk. Unfortunately, there are some problems eBay will need to address in order to make this IPO happen.  Lately, there have been rumors of a buyout offer coming from the founders, Niklas Zennstrom and Janus Friis, along with a consortium of buyout funds that includes KKR, Providence Equity Partners and Warburg Pincus. That news comes after Joltid, a company controlled by Zennstrom and Friis sued Skype over the issue of core P2P technology. Skype/eBay later filed a counter suit. Having followed Skype for a long time, I know for sure that this is a big deal, and any plans of an IPO could be derailed by this litigation.

In a post back in 2006, I pointed out that this core technology wasn’t part of the Skype-eBay transaction. In a chat, Friis told me, “Kazaa and Skype were based on a piece of technology called the Global Index. Skype basically built a communication layer on top of that. That technology has evolved since then, and the Venice Project is built on that Global Index — and we have developed a P2P video streaming layer on top of that core technology.” The Global Index mentioned by Janus is actually the Joltid Global Index Software, which is owned by a company called Joltid Ltd.

It would be interesting to see how eBay resolves this situation — with founders interested in buying back the company, the resolution isn’t going to come easy.