Skype Actually a "Voice Over IP Litigation" Service
What a costly blunder Skype has proven to be for eBay. A $2.6 billion purchase price. A $1.4 billion asset-impairment charge. Missed financial targets.
And now this: eBay’s plans to spin off Skype next year are being threatened by a legal dispute over the telephony service’s underlying technology.
In a 10-Q regulatory filing Thursday, the online auctioneer said it is developing an alternative to that technology, which it licenses from Joltid, a company run by Skype co-founders Niklas Zennstrom and Janus Friis, but there is no guarantee of success. And if it fails in that effort and its legal dispute with Joltid drags on, eBay could be forced to shutter Skype.
“Although Skype is confident of its legal position, as with any litigation, there is the possibility of an adverse result if the matter is not resolved through negotiation,” the company said. “Skype has begun to develop alternative software to that licensed through Joltid. However, such software development may not be successful, may result in loss of functionality or customers even if successful, and will in any event be expensive. If Skype was to lose the right to use the Joltid software as the result of the litigation, and if alternative software was not available, Skype would be severely and adversely affected and the continued operation of Skype’s business as currently conducted would likely not be possible.”
That doesn’t bode well for eBay’s plans to take Skype public in the first half of 2010. Though the company insists its plans to separate the telephony service have not changed, it’s clear that eBay (EBAY) must resolve these issues before moving ahead.
Certainly, it will be difficult to gin up investor interest in an IPO for a disabled service run by a company that spent billions of dollars to purchase it and failed to secure its underlying technology.