Software // Enterprise Applications
12:59 PM

Skype Co-Founder Admits eBay Paid Too Much

Niklas Zennstrom reveals Skype's growth trajectory was probably "front-loaded," but the company nevertheless was growing at a satisfactory rate before he left.

Skype co-founder Niklas Zennstrom, suddenly without a full-time job at the VoIP firm, confirmed this week what many eBay investors suspected the moment the online auction firm acquired Skype: eBay paid too much for the acquisition.

A week after eBay announced that Zennstrom had "stepped down" as head of its Skype unit, Zennstrom said Skype's growth trajectory was probably "front-loaded," but the company nevertheless was growing at a satisfactory rate.

"We overshot in terms of monetization," Zennstrom said Tuesday at a technology conference in Hungary. "Our position in the market has strengthened... you need to look at the long-term value of companies." He quantified the statement by noting that Skype still dominates the VoIP market with more than 200 million registered subscribers.

The revelation is cold comfort for eBay, which will take a $1.4 billion charge related to Skype's operation. Michael van Swaaij, eBay's chief strategy officer, has been named to head the Skype unit until a successor is hired to take Zennstrom's place.

When eBay announced the Skype acquisition two years ago, the online auction company paid $2.6 billion for the VoIP phoning company and earmarked another $1.7 billion payout to be based on Skype's reaching certain performance goals, with the expected payout to take place in 2008 or 2009.

However, in its Oct. 1 announcement, eBay revealed it has paid just $530 million "to settle all of its future obligations under the earn-out agreement."

Zennstrom is now focused on building out his Joost online video firm, which debuted in January 2006. Joost this week opened its service to users, although Zennstrom said the service isn't ready for a formal debut and is still being tested.

Skype co-founder Janus Friis has joined Zennstrom in departing Skype. Friis was listed at eBay as a "non-executive chairman," according to the eBay Web site.

In addition to helping out with Joost, Friis said in a blog post this week that he's aiding Atomico. The risk capital group has already quietly invested in many companies such as Technorati, FON, and Last.FM.

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