eBay waves wand, Skype value disappears

Well, now it’s official: Skype turns out not to be worth the $4.1-billion that eBay seemed to think it was back in 2005. As Henry Blodget notes at Silicon Alley Insider, the $1.4-billion writedown that the online auction company just announced effectively recognizes what everyone else has known for some time: Skype may or may not have been a mistake (I would argue it was, although Ash Karbasfrooshan disagrees), but one thing is for sure — eBay paid way too much for it.

In true contrarian fashion, my friend Paul Kedrosky says that all the breast-beating about eBay overpaying for Skype is overdone:

“Ebay is still motoring along, and this is lots of reason to be optimistic about the auction company’s future.

Over-focusing on the lamentable (and long past) Skype deal strikes me as a mistake.”

As I said in a comment on Paul’s post, I disagree. eBay may very well be motoring along, but the purchase of Skype was an error in judgment, and a fairly expensive one at that. I realize that a $1.4-billion writedown is small beer for eBay, but the fact that the company made such a decision — without any compelling synergies or anything else to justify the price — speaks volumes about the leadership of the company as far as I’m concerned (as usual, John Paczkowski has the best headline).

It’s nice for Niklas Zennstrom and Janus Friis that they not only get a big chunk of that $530-million earnout, but they can now get on with their lives (and with Joost, which launched as a no-invite-required app today) and quit trying to force some kind of fit between Skype and eBay — a fit I’m willing to bet they never saw either, although Niklas defends the deal in an interview with Thomas Crampton (Janus writes about it here).

As for eBay? Henry thinks they should sell Skype to Yahoo or Microsoft or someone like that, and he might just be right. Jeff Nolan thinks the company should turn it into a backend service-type offering, a la Amazon’s EC2.


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