The $2.6 billion price tag that eBay Inc. (Nasdaq: EBAY) paid for Skype Ltd. back in 2005 was a bit excessive after all. EBay announced today that it would be taking a $1.4 billion charge related to its acquisition of the Internet phone service provider. (See EBay Buys Skype for $2.6B and Skype's EBubble.)
The charge includes a payment of $530 million to Skype shareholders as part of a payout agreement tied to the company's financial performance. The payout agreement was worth as much as $1.7 billion, so the fact that payment comes in much lower than that indicates that Skype has not met financial targets.
In addition to the shareholder payout, eBay will write off approximately $900 million in acknowledging that it overpaid for Skype. This move will help reflect a more accurate value of Skype on eBay's financial books for the most recent quarter, ended September 30.
EBay also announced that Light Reading mover and shaker Niklas Zennstrom will be stepping down as CEO of Skype but will remain the company's chairman. (See Skype Has New CEOand Top 10 Movers & Shakers.) EBay's chief strategy officer, Michael van Swaaij, will be the interim CEO while the company searches for a permanent replacement for Zennstrom.
This is good news for some. This Skype deal messed up all landline voice service providers' business case. When this technology migrates to mobile phones, its impact will be reduced. Lucky you cell phone operators!
Was there any indication of who at eBay was going to be held accountable for such a stupid price?
This purchase and youtube looks like inside dealing to me. Where's the article on that?
Wall Street regulated these behaviors about as well as Greenspan's oversight regulated fraudulent sub prime mortgages.
I read there was a study done comparing the returns over the last few decades for professional investors managing funds like 401ks vs the mafia's returns on union pension funds in decades previous. The mob gave significantly better results.
so far it looks like Zennstrom, haha. That's a good question though. With a huge acquisition like that, if anyone should be held accountable, it should be eBay's CEO. I don't think there's going to be any fallout from this though. I think the market long ago priced the excessive valuation of skype into ebay's stock and therefore this wasn't anything unexpected to it. Ebay's share's finished up today too.
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