eBay Admits It Overvalued Skype

By Digital Trends Staff October 1, 2007

You may remember two years ago when eBay handed over $2.6 billion to purchase VoIP company Skype. People were surprised, and Skype founders Niklas Zennstrom and Janus Friis were a very happy pair.

Now eBay is admitting it might well have paid well over the odds back then, and is writing down the value of its investment in the company.

The result? The company is taking charges of $1.43 billion on the purchase. Around $900million of that is a write-down of value, with another $530 million earmarked to settle future obligations to some shareholders.

In the second quarter of this year, Skype only generated revenues of $90 million, according to eBay.

Both Skype’s founders have quit, although Zennstrom will become non-executive chairman. They also run the online video company Joost, which began making its software freely available yesterday.

When eBay bought Skype, it said it might pay another $1.7 billion on top of the $2.6 billion, dependent on performance. This will not now be forthcoming, which sent share prices higher.

However, eBay has announced that Skype shareholders might receive another $195 million if the company manages to sell 50% or more of Skype before the end of March 2008.

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