Skype Saga Turns Out To Be Clever Negotiation

For some time it’s been clear that eBay needed to dump Skype, the VoIP service for which it paid $2.75 billion in an acquisition that made no sense then and seemed even crazier as time went on. So little surprise when eBay announced a deal in September. But there was a fly in the ointment: the original owners of Skype, who held key technology that the company only licensed, weren’t happy with eBay’s use of the service’s source code, and so filed a big copyright suit. Now it turns out that the entire procedure was one of the more clever bits of negotiation you might find in high tech.

Skype founders Niklas Zennström and Janus Friis had maintained control over the fundamental technology that Skype used, creating a company called Joltid to manage the licensing. For eBay to have acquired Skype without owning the technologies that drove the systems was incredibly stupid. As I wrote back in September:

Skype has noted in SEC filings that it “is confident in its legal position,” but, really, what high tech company acquires another for a customer base and product line and then agrees to license, not to own, some of the technology that it key to the operations? You’d have to be nuts. I don’t care how airtight the license seems to be. This is presumably one of those “key competency” issues. How can you let that sitting in the vault of another company?

Now it appears that Messrs Zennstrom and Friis were simply far smarter than the crew at eBay. As the latter’s management team drooled over the idea of a big win through acquisition, the founders, who were now billionaires, created an additional deal annuity.

The proof is in the outcome: Zennström and Friis make an investment and take a 14 percent stake in the spun-off entity. In return, the duo drops legal action and provides the rights that any intelligent high tech legal or management team should have insisted on in the first place. Congratulations to the two individuals for a game well-played, and a shake of the head at all who blundered so incredibly.

Image via stock.xchng user lusi, site standard license.