Centurion

Ebay writes down Skype value by $1.4bn



By Richard Waters in San Francisco

Published: October 1 2007 21:14 | Last updated: October 1 2007 21:14

Ebay on Monday conceded that its controversial acquisition of the internet telephone service Skype had fallen well short of its hopes, writing down the value of its investment in the company by $1.43bn (£695m), or nearly 50 per cent.

At the same time, Niklas Zennstrom, one of the founders of Skype, quit as the unit’s chief executive after missing out on a pay-day that could have earned him and a handful of other shareholders an extra $1.2bn.

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The write-down and management upheaval come two years after Ebay unveiled its controversial plan to make Skype the third leg of an expanding internet conglomerate, alongside its e-commerce and online payments businesses.

However, while the internet telephone service has continued to add users at a fast rate, it has so far failed to produce the sort of e-commerce and advertising revenues that Ebay had hoped.

Ebay agreed two years ago to pay $2.6bn for Skype and spend up to €1.2bn more if the unit hit certain performance targets over the following three years.

In the event, the company said it had made an early payment of only €375m to end all its obligations, taking its total purchase price, based on current exchange rates, to about $3.13bn.

The partial payment of the "earn-out" provision reflected Skype's success since the acquisition in building its base of users to 220m, an Ebay spokesman said.

Skype revenues reached $168m in the first half of this year, but the company admitted that this was shy of its short-term goals.

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Centurion

Second IT-bubble bursting??? I hope this will wake people up and teach the big boys not to over-value internet based companies like Facebook, Joost and Youtube.

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