TechCrunch: What Was Skype’s Shortfall? When Skype founder Niklas Zennstrom stepped down earlier this month with only one-third of his payout from eBay, it was clear that Skype fell short of its goals in regards to growing its number of active users,…

@Jon:

You’re definitely right about Skype. It’s not a losing company. It was the first company that became widely known in its field. Whether it was in fact the first company ever is irrelevant–perception > truth.

Karim Baz

Jon

Regarding your CNet scenario, if we couldn’t produce 30K new readers in a week, then Mike and I should definitely be fired

Two things stand out to me about Skype:
1) The revenue-generating features are marketed atrociously. Skype should have been bundling key features to help people understand them, instead of selling each thing separately. They have packages now, but these aren’t well designed.
2) They’re way behind on messaging, should be offering incoming fax, and forwarding of both voicemail and fax to email if desired. This would rope in small business user, who will pay more for communications.
3) Dramatic price increases for Skype In numbers only amplify concerns people have about eBay’s history of jacking prices. It’s tough to invest in a Skype phone number when eBay might mug you in an alley at any time.

Skype shows signs of a headless business unit, where he drive and inspiration is gone and the show is managed by competent stewards only. It’s not reaching for anything. It has no direction. Not surprising, given most of what I hear about working at eBay.

With a few tweaks and moderately inspired leadership Skype could perform at many times its current level. In the right hands, it should be able to meet eBay’s expectations. Just probably not under the current eBay management team.

So while their gross revenues may be $400 million, it would not surprise me if the gross margins are 10-20% or less. Add infrastructure costs, head count, etc, and they’re not making money.

EBay should have stuck with its core business. Skype would have been better off if they’d been acquired by a telecom. At least they would have understood the economics of the business better (or maybe they did, and refused to pay more than fair market value).

As someone who has done both (1) start a company and (2) integrate large acquisitions, I can tell you - integration is by far the harder challenge. The shortfall is most often a function of many things including size, growth, expertise, unrelated challenges, and maybe the expectations from an off original valuation.

You can pick someone to blame, that’s easy - the analyst that did the valuation, the Board who approved the acquisition, the incoming CEO who was strong enough to lead to the exit, his/her boss who had X number of direct report senior executives with the same size challenges. Doesn’t matter. There are very few people in the world who actually know how to do large acquisition integration well. Seeing eBay have difficulty with this one just helps prove the rule, not highlight an exception.

Skype is still there. It will drive some great value. Some times it takes more time than most managers could stomach. I sure found integration tough and I didn’t work for eBay.

Another point that Rons made and I agree with was that the “terms” of a earn out are set “entirely” by the acquirer. Again we can only speak about our experiences. We (meaning the seller and buyer) sat down and went over, strategy, market conditions, etc. And we suggested based on those key variables and a few others how , best to execute that strategy.

I am merely offering another side, that i think was not put forward. And yes while the earn-out details we are not privy to, I still think (my opinion) that earn-out conditions was set entirely by the buyer and the seller had “0″ input.

My two cents.

People are still smoking the .com Huka pipes although they refuse to admit it.

Carmelo Lisciotto

Weather Skype is integrated into eBay fully or not at all is less of an issue with respect to the price they paid for it. They paid too much for Skype’s growth. And they know it. I wouldn’t call it Skype’s downfall, but rather eBay’s mistake.

So what. Companies make bad moves all the time. Move on.

Make it a standard and it will take off like a rocket!

Darin

Would you blame CNet for asking Micheal to step down from his position and recalculate his earn out based on his “under” performance?

I think the thing we keep forgetting here is that ebay like any other company has shareholders to report to and when individuals dont perform they have to do what is in the best interest of their shareholders and the company. I think that is only fair.

I think earn out are great ways to hold “sellers” accountable to their sometime rather ridiculous forecast.