Skype Struggling?

EBay Plans to Take $1.4 Billion In Skype-Related Charges
Skype Founder Zennstrom Steps Down as CEO

By KEVIN KINGSBURY (WSJ)
October 1, 2007 12:27 p.m.

EBay Inc. said it plans to take $1.4 billion in Skype-related charges in the third quarter and announced a management shakeup at its Internet phone subsidiary.
The Internet auction giant said the charges include $530 million to complete payments related to its 2005 acquisition of Luxembourg-based Skype. The other charges reflect goodwill impairment due to "the updated long-term financial outlook for Skype."

In addition, Skype co-founder Niklas Zennstrom has stepped down as CEO of the company and will become non-executive chairman. EBay also said Henry Gomez, an eBay veteran that was tapped to be Skype's president eight months ago, will return to eBay as senior vice president for corporate affairs.

EBay said Michael van Swaaij, eBay's chief strategy officer, will become Skype's interim CEO while the company searches for a replacement. The company did not say if it plans to name a new Skype president.

Skype was acquired by eBay for $2.6 billion, with the potential of its former shareholders receiving an additional $1.7 billion depending on performance levels in 2008 and the first half of 2009. EBay said the $530 million payment "is reasonable given the progress and anticipated rapid growth of Skype's active user base."

Skype lets Internet users of its software make free calls through their computers to other Skype users. It charges cheap rates for a variety of other services such as Internet-based calls to non-Skype users' mobile phones.

Skype's second-quarter revenue more than doubled to $90 million, about 5% of eBay's total, with registered users nearly doubling to 220 million.

EBay officials have admitted that it has taken longer than expected for the company to benefit from the Skype deal, which was seen as a way to branch out from its core online auction operations.

Earlier this year, Wal-Mart Stores Inc. added an array of Skype phone gear to the electronics sections of 1,800 stores, bringing the provider of inexpensive Internet calling to a mainstream audience. Skype has developed a following, especially among international callers, but the service isn't as well known to the general public.