As the New York Times reported, Skype’s founders, Niklas Zennstrom and Janus Friis, are in talks with several private equity firms and are amassing their own financial resources to make a bid for the internet phone business. eBay bought Skype from Zennstrom and Friis for around $3.1 billion in 2005. We reported last year that eBay would be willing to sell Skype if the company couldn’t support eBay’s core ecommerce business.
eBay has been having trouble finding ways of using Skype across its other products. eBay removed Skype co-founder and CEO Niklas Zennstrom in October 2007, reportedly due to frustration at the financial performance of Skype. Ebay also negotiated down the huge earnout due to Skype stockholders and took a $936 million one-time loss around the transaction.
As we wrote last spring, a sale was projected to be likely late last year or in the first half of this year. Of course, with the economy in such poor condition, the sale was probably put off momentarily. There was something brewing between Google and Skype last spring, but nothing came of it. Google recently launched its own voice product, Google Voice (formerly Grand Central).
Skype recently launched a nifty iPhone app, which was downloaded 1 million times in the first two days of its release. Skype recently made a move to be a player in the enterprise space, but it wasn’t clear how much of a money-maker the new service would be.
There’s no doubt that Skype brings a lot to the table but eBay was probably just not the right buyer. Skype’s scalable technology and a proven platform in the VOIP, VOIP2POTS and P2P Video is impressive to say the least. The service currently has more than 405 million registered users.
Following their respective departures from Skype, Zennstrom and Friis formed VC firm Atomico and founded online video/TV site Joost.
That’s an interesting development, shows the founders faith in their own product, I wonder what is eBay’s price?
I also wonder if this is an indication of lost faith in Joost’s success!?
Leena Rao.,
I do think that this will be better for Skype..eBay has gone haywire in their strategization for the different products. A dedicated focus on Skype can create wonders on the VOIP space..
I just came accross this new startup in the Skype space and its free.This new site has a lot of potential if they make good on the free USA phone and it has happend when you signup you get a free USA numebr and all calls to the USA are free.Just a thougt before you go paying billions again for Skype it does not make sense.I will by a samll startup and put my money in marketing and wow i will have the millions flocking to my site.
Good luck to them! I have the feeling their vision is broader than eBay’s…
Well I’m sure of that Denise, because they already have the passion making it in the first place.
-Sammy
Seriously… ??
I think not.
http://www.wannadevelop.com
I’m not surprised. Skype is doing so well, I’m sure they could go somewhere with out piggybacking off EBay.
why?
spend those millions and enjoy life
Bad perspective.
Yeah I made $120k last year. I’m thinking about enjoying life and not working for two years since the average income in the US is $40k. I should be good for two years!
Another bad perspective.
whoosh!
sarcasm is not strong in you.
This will work well for both sides. It will also give eBay a stalking horse to try to get a better offer.
That’s true, But as it works for both ways – Both wont make a bad deal as both want to earn from it.
Tho, I guess that skype is going to be a major service in 2010.
You build something, raise and feed it and you hope for the best for it… You see it floundering and know you can do better for it, so you try to get it back to nurture it.. Hopefully without losing billions in the process.. I would have to assume if they want it back, they have plans on how to make it profitable..
I heard they just want the iPhone app.
Let me get this straight. I’m going to buy it for 3 billion when it has 53 million users and is losing money, and now I’m going to sell it for half that with 400 million users and its making money? Are they freaking crazy? Sell the auction business if your going to sell something.
Are you retarted? eBay is a public company. Their market cap is $20B. They publicly release how their company does. Their auction business is still strong.
auction to deadpool
Skype is garbage — too many new technologies emerging that will crush that hunk of junk
Niklas and Janus should either invest in hot trends — or relax and live life.
I second that, Skype is not even started to be popular.
Grows and grows and it is going to be a major service within years.
Exactly what ‘technologies Emerging’ are poised to ‘crush’ skype?
400 MILLION registered users, positive cashflow, enterprise product, world leading vopi-algo. Yeah, they have nothing going for them?
I use skype daily and call worldwide for $10 month, have my on number, use usb-phone with my laptop.
Love it, and would gladly pay more if they asked me since they are still WAY ahead of any competitor.
I think Skype might be one of the REALLY big phone companies on enterprise too within a few years.
I hope someone buys it from eBay, but it isn’t clear that the founders are the right folks.
Skype needs people who have handled large scale successfully in international markets, and people who can increase revenues by addressing small business customers.
Skype has indeed been flowndering since run by eBay – and eBay never implemented the obvious “tele-presence” synergies with their on-line shopping business…
I am sure that the founders will do a better job…
H
What a bunch of greedy bastards. They sell it for 3 billion with 53 million subs and losing money, now they want it back for half that with ten times as many subs and its making money? That’s taking bad Karma to new heights. I’d tell them they’d could have it back allright. And I’d tell them where they could put it!
there is absolutely no such thing as karma
Karma isn’t something that exists ‘out there’ it is a reflection of how your actions affect your own personality, sense of self satisfaction and peace.
Bad Karma therefore is never finding peace because of your bad actions.
I never do any bad actions. Your comment makes no sense. Whatever I do is right.
Yeah, cause selling your creation at a good price and buying it back when you see it mishandled at a lower price is just so bad?
What planet do you live on where businessmen making financially sound decisions is ‘bad karma’?
not gonna happen … the founders are hated at ebay for running skype into the ground just to get their eran out. Josh has been doing a great job turning around the business.
Do you even know what company we are talking about?
How did they ‘run it into the ground’ and are you aware of the fact that they took a huge hit on their payout pretty much ‘just to be nice’ to Ebay?
Yeah, real snide businessmen there. Obviously just destroying their creation and loose money on it to be able to buy it back, right?
You totally get it, wow!
SK Telecom, the huge Korean telecommunications company, looked into buying Skype but backed out for some reason. Seemed to make sense as telecom companies are losing their lunch to phone over the internet companies. And, since their last entry into the US telecom market failed and their completely wrong effort to buy a controlling stake of Sprint hasn’t worked out, Skype makes more and more sense…
Always thought it was an unusual purchase for ebay – probably makes sense for Skype to separate
This is a good news. The founders can definitely manage it best rather than any other people.
This makes perfect sense. Ebay has not been able to do anything good, founders will surely have the right vision for skype and take it further.
Ebay will want to keep a hold on Skype, and I will tell you why:
In a few years the roll out of high speed white space broadband from AT&T and Verizon will blanket the entire United States where everyone will get up to 100MBPS wireless access.
Skype will be a solid alternative for telephone service, which they will offer at some $20 a year.
Since most people will likely subscribe to the white space broadband, Skype will likely be the software these companies will license to include on white space designed devices.
Yearly subscribers plus device software licensing will spell billions a year for EBay.
EBay, the creators of Skype know this and this is why they want it back.
You are a loon. eBay didn’t create Skype, they acquired it from Niklas and Janus. Didn’t you read the article?
Easy Conan the grammarian. if you read the rest of the sentence it’s clear the writer knows eBay didn’t create skype; he just forgot the conjunction *and* to begin the clause.
And anyway, he’s right. Skype produced $500M+ in revenue last yr according to my inside sources. It will be a legitimate phone co alternative.
Thanks for clearing up the troll poop.
Would your inside source happen to be eBay’s earnings report? The one that’s publicly available from their website?
This line is talking to eBay, who I know for sure reads TechCruch, and who in turn know me by name and site listed here (I am a well known PayPal developer):
“EBay, the creators of Skype know this and this is why they want it back.”
This is TechCrunch my friend, where the real people who run these companies come read and comment anonymously, know where you are first before making such asinine n00b comments.
Never heard of you. And I don’t understand the post.
uhh, it’s in english Tom.
These guys have good ideas but cannot turn them into a running profitable business. I know skype from common knowledge and use it every now and then. From my experience, there is a huge gap between using it for free than paying for it, very few people do pay… Any way I do know Joost inside out and only for running a great idea to the ground, I would think twice before going to business with them.
eBay has been doing a stellar job managing Skype – particularly under the leadership of President Josh Silverman. Skype reportedly generated $500 million in revenue in 2008 and eBay has publicly committed to reaching $1 billion by 2011. If Niklas and his sidekick Janus couldn’t hit their targets and earn a payout after eBay made the acquisition, what makes them think they can do it now? Oh – I know…eBay actually made Skype work, and they want to come in and ride the wave! If I were eBay, I’d ask for 10x trailing revenue. In other words, a price tag of $5 billion…go take sell that to your private equity peeps!
Here’s the problem with $500M revenue, the operating margin is less than 1%.
They need new ways (higher margins) of monetizing their technology – which explains the Enterprise move.
It’s more like 20%. But, I know, facts are inconvenient.
I don’t think Skype really evolved and became significant under eBay in any stretch of the imagination. I think they may have more improvements and vision under their original founders with new features. I don’t ever saw how ebay bids were linked with skype. They maybe losing market share and recognition. They still have tough battle ahead with Yahoo, google, microsoft live video chats though.
Hola, probando C
Did josh really have any input in getting almost $500 Million in revenue….when you have that many users it is easy to co-ax a few of them to sign on for a year….
best,
linda
Seems like a nice hobby to purchase it back. Any plan to make money?
When Ebay bought them I was looking forward to see how they would merge the technology into the auction site. I am still waiting, if the original founders get it back I am sure that we will see Skype start to evolve at a rapid pace.
I don’t think thats going to be a fair deal. Do the skype owners have still the right to buyback the Skype. I don;t think so.
-Mohit
I am supprised that TC has not picked up on an even bigger issue relating to Friis/Zennstrom & Skype. I ( @AAinslie )tweeted this on April 3rd:
WOW: @SKYPE may loose their core P2P tech license as @JanusFriis & @NiklasZennstrom can cancel it! http://bit.ly/2a81MY …gets @eBay #pwnd!
9:54 PM Apr 3rd from web
…essentially eBay may not even have a choice but to sell Skype back to Friis/Zennstrom quite inexpensively. Friis/Zennstrom seem to have a lot of leverage in this deal as they were not only smart developers in the technical dept. when they put Skype together – they were also very astute in the way they structured their licensing arrangements relating to key Skype IP.
As a BVI based investor/inventor/developer of gaming related IP I had a good chuckle reading about the way in which Friis/Zennstrom structured their IP licensing deal. Sharp forward thinking.
The lesson here for companies who are in-licensing IP is get good specialist advice. For companies out-licensing, IP licenses (when structured properly) are an effective advantage. Do not skimp here – get the best possible IP licensing legal advise you can possibly afford and think long term. As Friis/Zennstrom has demonstrated, it pays off.
More of this story via PaidContent.org
eBay Goes To Court To Hang On To Fabric Of Skype
By Patrick Smith – Fri 03 Apr 2009 10:25 AM PST
With Robert Andrews:
Skype is taking to court the owner of the very P2P infrastructure on which it depends, in a licensing dispute that could even kill the internet phone company in its current form. Parent eBay (NSDQ: EBAY) filed suit in London’s High Court against Joltid, a Jersey, England-based company started by its own founders Niklas Zennstrom and Janus Friis that licenses its vital peer-to-peer technology.
After founding P2P filesharer KaZaA then selling it to Sharman Networks in 2002, Niklas Zennstrom and Janus Friis went on to start Joltid, further developing peer-to-peer technologies for distributed storage and communication. Zennstrom and Friis picked Joltid’s Global Index product to underpin Skype’s efficient means of routing internet voice calls, and the license has been in effect since.
Skype recently ripped up an agreement allowing either side to take action beginning March. But, according to eBay, Joltid, actually registered in the British Virgin Islands, says that’s a breach of terms and tried to end the licensing relationship. So eBay has asked the High Court to rule the termination attempt “invalid” and declare Skype is not in breach. The case was scheduled to be heard at the High Court on Friday.
eBay’s release says: “Skype strongly refutes those allegations and is confident of its legal position.” But its SEC filing shows how worried it really is – to put it baldly, Skype would be finished: “As with any litigation, there is the possibility of an adverse result if the matter is not resolved through negotiation. In such event, Skype would be adversely affected and the continued operation of Skype’s business as currently conducted would likely not be possible.”
… as you can see from the above, mighty eBay are in a rough spot with this and they know it – so do the smart Swedes!
I doubt it would be too difficult to switch over to a non-infringing architecture. The peer-to-peer aspect of Skype is not very important.
be careful google voice is here , so i personally think that taking back skype is really risky , the founders can lose everything
Would EBay sell it back now? Uh, no, sorry.
WebNex: Skype is not suited for an eBay environment, and the company are looking to offload it. With that said the founders will obviously be interested in purchasing Skype back and have offloaded some of their mistakes on services like Joost. Also the founders were there until October 2007 (which is after they sold it to eBay) and helped grow the service. It doesn’t mean that they’d buy it back because, I’m certain they’re will be other interested parties like Google to integrate it with Google Voice etc.
Why can’t they just fall back on their great Joost product? Oh, right…
not that way
dont we all love sabrine maui?
It’s crazy they want to do this. I figure they would want to do bigger things in the future
Even if SKYPE is worth a Billion, the magicJack is worth a few hundred million today…..especially with its femtocell product and more.
I don’t get it why people overpay for international calls on Skype. There are dozens of cheaper VoIP services out there undercutting Skype:
http://www.fring.com – use any SIP provider here
http://www.truphone.com – works on Iphone
http://www.voipian.com – calls for 1 cent
…and the list goes on.
So why even use Skype when they’re clearly overpriced?
I don’t this is a nice idea.. ebay doesn’t have a good connection to skype at all..