Online auction giant eBay announced Friday that its sale of a controlling interest in its Skype unit will proceed, following the settlement of litigation over the proposed transaction.
The settlement restructures the deal with an investor group led by Silver Lake and puts an end to a dispute with software maker Joltid over the licensing of software that underlies Skype's Internet telephony service.
In addition, the settlement brings Skype and Joltid founders Niklas Zennström and Janus Friis, into the investor group. The duo will take a 14 percent stake in Skype in exchange for contributing Joltid software and a "significant capital investment."
Silver Lake and other investors will now hold 56 percent of Skype, and eBay will retain 30 percent. Those other investors include the venture capital firm Andreessen Horowitz--started by Marc Andreessen, the man behind the early Web browser Netscape--and the Canada Pension Plan Investment Board.
Venture capital firm Index Ventures, which had been embroiled in the legal action, has withdrawn from participation in the investor group.
As in the initial agreement, eBay will receive approximately $1.9 billion in cash when the sale is completed, along with a note from the buyer in the principal amount of $125 million.
The deal, which eBay says puts Skype's value at $2.75 billion, is expected to close during the current quarter.
Under the settlement agreement, which involves the Silver Lake investor group, Joltid, and online video company Joost, Skype will have ownership over all software previously licensed from Joltid. All related litigation now pending against the investor group and eBay will cease at the closing of the acquisition.
Zennström and Friis had sold Skype to eBay for $2.6 billion in 2006, but they had also retained the rights to Skype's peer-to-peer technology via Joltid, a separate company that they had also founded. In its lawsuit filed in September of this year, Joltid raised charges of copyright infringement, alleging that Skype had acquired unauthorized versions of the source code, made unauthorized modifications, and disclosed the software to third persons.
Also in September, Joost--yet another company started by Zennström and Friis--filed a lawsuit against former Joost CEO Mike Volpi, who two months earlier had become partner at Index Ventures, which also was named in the lawsuit. Joost claimed that Volpi, who had done a stint on Skype's board of directors, had used confidential information as part of Index Ventures' participation in the Silver Lake-led effort to buy a majority share in Skype.
In the third quarter, Skype contributed $185 million in revenue to eBay, up nearly 30 percent from the year-earlier period. It has more than 520 million registered users.
Update at 8:10 a.m. PST: More details of the settlement have been added.
Updated at 5:10 p.m. PDT with eBay comment.
Joltid, a peer-to-peer software company established by Skype's founders, filed a copyright suit against Skype Wednesday alleging Joltid's technology is being infringed on by Skype users "in the United States at least 100,000 times each day."
Just the latest in an ongoing license dispute between the popular VoIP service and its developers, the lawsuit, filed in Northern California U.S. District Court, seeks an injunction and damages, which Joltid "reasonably believes are amassing at a rate of $75 million daily," according to the suit.
Also listed as defendants are Skype's current owner eBay, as well as investors in a consortium that earlier this month signed a deal with eBay to acquire a 65 percent stake in Skype, with eBay retaining 35 percent.
"Skype has infringed Joltid's copyrights," a company spokesman said in a statement. "Joltid will vigorously enforce its copyrights and other intellectual property rights in all of the technologies it has innovated."
"Their allegations and claims are without merit and are founded on fundamental legal and factual errors," eBay spokesman John Pluhowski said in a statement.
The lawsuit has the potential to at least complicate the ongoing sale of Skype. In the past, however, eBay has said it's working on its own software to replace what it gets from Joltid.
In 2006, eBay bought Skype for $2.6 billion, but co-founders Janus Friis and Niklas Zennstrom retained the rights to Skype's key peer-to-peer technology--Global Index Software--via the Joltid company they formed.
Joltid terminated its license for the software after learning that Skype had allegedly acquired unauthorized versions of the source code, made unauthorized modifications, and disclosed the software to third persons, according to the lawsuit.
The two companies have been involved in a separate lawsuit in the U.K. over that license termination, but the case isn't set to go to trial until June 2010. Referring to that suit, eBay's SEC filing regarding the sale of Skype says "consummation of the deal was subject to 'no settlement of the pending litigation with Joltid Limited having been effected without the consent of the Buyer (subject to certain limitations).'"
The other defendants in the suit filed Wednesday are Silver Lake Partners, Index Ventures Management, Michaelangelo Volpi, Andreessen Horowitz, and the Canada Pension Plan Investment Board. This lawsuit was first reported Wednesday by The Wall Street Journal.
Starting Friday, Skype is effectively pulling the plug on its Extras program, which was designed to help third-party developers create add-ons for Skype's VoIP service (Windows | Mac)--like emoticon enhancements, backup services, and music player plug-ins. Unlike Firefox's similar third-party extensions, not enough people were installing Skype Extras, Skype said in both an e-mail and in a blog post to developers.
Developers and users will have some adjustment time, though. Skype won't certify any new submissions, but it won't yank support for existing Extras either, that is, until their certificates expire. You'll still be able to install existing Extras through the Windows desktop client, and you'll still see them featured in the Skype shop. Skype will also continue to maintain its public application programming interface.
Since many Skype Extras are sold to users as premium content, the shutdown also has a financial impact for profiting developers. They'll have two months, until December 11, to continue using Skype Credit. Developers will need to submit a final invoice by January 25; after that Skype will shutter its third-party shop.
Skype's shucking of its Extras service is unconnected to former parent company eBay's auctioning it off to a lucrative bidder. However, under new ownership, we could see even more changes to the well-known VoIP communicator. Stay tuned.
(Credit:
Screenshot by Jessica Dolcourt/CNET)
Good news for Canadian iPhone owners. On Wednesday, finally crossed the border into Canada, where it is now available for download from the App Store. The well-known voice over Internet Protocol, or VoIP, app first became available for the Apple smartphone about five months ago, on March 29.
Skype for iPhone handles the basics of its desktop PC-to-PC and PC-to landline calling service. It offers free calls between Skype users over a Wi-Fi connection; Apple won't allow 3G-based data calls.
The app can, however, use 3G and EDGE data connections for non-call-related activities such as signing in and sending Skype instant messages. There are also competitive rates for calling out to a landline or mobile phone. Call forwarding has been implemented, as has Skype Voicemail and Skype-generated texting.
Besides English, Skype is also available in Danish, Dutch, Finnish, French, German, Italian, Japanese, Korean, Norwegian, Polish, Portuguese (Brazil), Portuguese (Portugal), Russian, Simplified Chinese, Spanish, Swedish, and Traditional Chinese.
Related story: Sold! eBay jettisons Skype in $2 billion deal
E-commerce giant eBay announced Tuesday that it is selling its Skype unit to an investor group that includes Marc Andreessen's new venture.
Under the deal, eBay will receive approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million, for a total of $2.025 billion. The participants expect the deal to close in the fourth quarter.
The investor group, which will take a roughly 65 percent stake in Skype, is led by Silver Lake and includes Index Ventures, Andreessen Horowitz, and the Canada Pension Plan Investment Board. The remaining 35 percent of the Internet telephony service will be retained by eBay.
The parties said the deal values Skype, which is likely to see an IPO in the coming months, at $2.75 billion.
The sale of Skype had been expected for some time. Word of Tuesday's impending sale to the private investor group was first reported late Monday in The New York Times.
The Andreessen Horowitz venture capital group was launched in July by Marc Andreessen, the founder of Netscape and co-founder of Opsware, and Ben Horowitz, also co-founder of Opsware.
With the sale, eBay acknowledged that things hadn't worked out as planned with Skype, which it acquired for $2.6 billion in 2005 with the plans to offer customers the ability to discuss their transactions in real time. Over the course of the four years since then, eBay found that its acquisition failed to provide what it sought.
"Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments businesses," eBay President and CEO John Donahoe said in a statement Tuesday. "As a separate company, we believe that Skype will have the focus required to compete effectively in online voice and video communications and accelerate its growth momentum."
Lead investment firm Silver Lake echoed the forward-looking sentiments.
"This transaction benefits...will allow Skype the opportunity to accelerate the growth of its business by harnessing the deep technological and company development expertise that resides within the investor group," Egon Durban, managing director at Silver Lake, said in a statement.
In 2007, eBay said it would take a $900 million so-called impairment writedown against the value of Skype, meaning that eBay had been forced to reassess the value of the Internet telephony company relative to its overall business. By recording a charge, the company essentially announced it had taken a loss on its original investment.
When eBay announced Donahoe as its new CEO in 2008, he indicated that the company would take a year to evaluate the future of its online phone and video-conferencing service.
In April, eBay announced plans to spin off Skype, with an IPO in the first half of next year.
Along the way, reports had surfaced that Skype founders Niklas Zennstrom and Janus Friis were interested in repurchasing the company.
Clarification at 7:44 a.m. PDT: This story miscast the value of the deal. eBay gets approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million, for a total of about $2.025 billion. The companies say the deal values Skype at about $2.75 billion.
The founders of Skype may be trying to repurchase the Internet phone service, The New York Times reported Saturday.
Niklas Zennstrom and Janus Friis sold their company to eBay four years ago for $2.6 billion. Sources told The New York Times the two men have been meeting with private equity firms and gathering their own funds to finance the deal.
Since selling their company, the two have created venture capital firm Atomico.
According to Skype, its service has more than 405 million registered users. The compares with 54 million users when eBay bought it in 2005.
eBay has acknowledged that Skype has few synergies with its core businesses, the Times said. And eBay's chief executive has publicly stated that he's willing to sell it for the right price.
Neither the co-founders nor eBay would comment to the Times about a possible sale. But the Times reported that a source with knowledge of the plans said that Zennstrom and Friis are working toward a deal worth $2 billion.
Updated at 12:30 p.m. PDT with more information.
A week after its initial release in the iTunes App Store, Skype for iPhone has mysteriously disappeared. The vanishing act is temporary, Skype tells us, and began between 10 a.m. and 11 a.m. Pacific Time.
According to a Skype representative,
"The Skype for iPhone app was down for a couple hours, caused by our own submission of a 'hotfix' to simply address some feedback and minor improvements. The release date for the 'hotfix' was incorrectly applied to the current version of the app."
Skype says the issue is being fixed and that the VoIP app for iPhone is in the process of repopulating the App Store. Skype for iPhone is already available again in Europe, Skype says, and will return to global app stores within a few hours at most.
Correction 5:15 p.m. PDT: This story initially misstated the author of the letter where quoted. It is the Free Press.
An advocacy group on Friday called on the Federal Communications Commission to require wireless carriers to allow consumers access to Skype via smartphones, as well as the ability to connect their devices to the Internet through tethering applications on their cell phones.
(Credit:
Apple)
The Free Press, in a letter to acting FCC Chairman Michael Copps, expressed concern that wireless carriers were not abiding by the FCC's Internet Policy Statement.
Earlier this week, eBay's Skype made a VoIP application available for download from Apple's App Store.
But AT&T, Apple's exclusive iPhone dealer in the U.S., apparently wants to block the use of Skype on its 3G network, according to a report in USA Today.
In the USA Today report, Jim Cicconi, an AT&T public policy executive, said the telecommunications carrier had the right to forgo the facilitation of its competitors' services. He added Skype is considered a competitor.
The report further notes an Apple spokeswoman, Jennifer Bowcock, indicated the device maker limits third-party Internet phone applications for the iPhone and iPod to Wi-Fi.
In its letter to the FCC, Free Press says:
For two years, we have followed your leadership in raising concerns that wireless service providers appear to be engaging in activities that go against the Commission's Internet Policy Statement by violating consumers' right to run applications, use services, or attach devices of their choice over their broadband connections.
Recent reports about application blocking again raise these questions. Regardless of whether any particular incident would be found in violation of the law, the lingering uncertainty surrounding consumer rights on the Internet indicates the need for the Commission to clarify its rules. To resolve any alleged ambiguity raised by parties in earlier proceedings, the Commission should confirm that the Internet Policy Statement applies to wireless service providers that offer broadband Internet access service, as has been acknowledged in prior proceedings and statements of sitting Commissioners. Furthermore, the Commission should request more information on the extent of the wireless providers' role in and their justifications for these widely-reported behaviors.
Free Press further notes the FCC should investigate the practices of wireless carriers for possible violations of the Internet Policy Statement, as it particularly relates to possible direct or indirect limits on consumers' ability to run applications and services of their choosing on their devices.
If Skype for iPhone seems like a big deal to you, you're right. It's topping iPhone App Store charts in nine countries, Skype says.
The Skype for iPhone VoIP application, which became available Tuesday after an announcement at CTIA, is now the top free app in the U.S., U.K., Australia, France, Germany, Holland, Japan, Russia, and Spain.
"I'm delighted that consumers have voted with their fingertips and chosen to download Skype in such phenomenal numbers," said Skype Chief Operations Office Scott Durchslag.
You can read more about Skype for iPhone in our hands-on review or see screenshots in our slideshow.
Hot on the heels of releasing Skype for iPhone, the VoIP communications company has come to the table with news of a free, "lite" version of Skype for BlackBerry. Already downloadable for Android, Java, Symbian, and Windows Mobile, BlackBerry has remained Skype's missing link.
Just don't expect to share photos of your cat quite yet. While Skype's core capabilities will debut in Skype Lite for BlackBerry, not everything Skype can do will be available right out of the gate. You'll be able to call other Skype users for free, and can initiate calls to landlines and mobile phones using Skype Out credit. You'll also be able to receive inbound calls to your online Skype number. Instant messenger and SMS features will also stay intact, but features like voicemail and file transferring, which are also available on other platforms, will be delayed on BlackBerry for the time being. Also, unlike the iPhone version just released, you won't need Wi-Fi to connect to Skype. Skype Lite will work over your BlackBerry's data plan, so long as you have a calling plan.
Skype's announcement is just part of the company's three-pronged mobile strategy, Skype's chief operating officer, Scott Durchslag, said in a press conference on Tuesday at CTIA. Skype's first goal is to create a native application for all major smartphone operating systems. After BlackBerry, Palm's unreleased Web OS platform would be the last major hurdle. After conquering native applications, Skype will work to get its VoIP client preloaded on mobile phones and other Internet devices. To this end, Skype has already cut a deal with Nokia to be featured on the Nokia N97 when it ships. Lastly, Skype will court carriers to integrate Skype-to-Skype calling for phones that don't have Wi-Fi.
Skype plans to release a beta version of Skype for BlackBerry in May, starting with BlackBerry Bold any Curve phones, and gradually adding support for more BlackBerry smartphones. Skype Lite for BlackBerry will be available in ten countries to start with, including the U.S. and U.K., Australia, New Zealand, and Brazil, and parts of northern and eastern Europe.
Related stories:
Skype for iPhone: It's official
Skype gets SMS, file transfer for Windows Mobile






