Skype soap opera ends as founders set to regain stake ahead of $2B sale
byNov 5th 2009 7:59PM
After weeks of back and forth legal jousting, the tech heavyweights fighting over Skype are set to announce a deal in which the founders of the popular Web-calling service would regain a stake in the company they sold to eBay (EBAY) in 2005 for $2.6 billion, according to Bloomberg. Nice trick.
The pact ends an at-times vicious soap opera replete with accusations of back-stabbing, dishonesty and outright theft against Mike Volpi, the pair's one-time Golden Boy, who they believe double-crossed them. The legal circus held up eBay's proposed $2 billion sale of Skype to a consortium of private investors led by Silver Lake Partners and Andreessen Horowitz, the investment firm of Marc Andreessen, the billionaire co-founder of Netscape.
Niklas Zennstrom and Janus Friis, who founded Skype before selling it to eBay three years ago, will assume an ownership stake in the company, alongside the consortium, according to the settlement.
The duo, who had asserted an intellectual property claim on Skype's technology, also will drop suits they filed against Skype, the consortium and a former top executive of theirs, as part of the deal.
For the last several months, the pair has sought to hold up eBay's sale of Skype to the consortium for $2 billion in cash. Ebay would keep a 35 percent equity investment in Skype, and has maintained that it wants the deal, which values the company at $2.75 billion, to close before the end of the year.
Skype never paid off for eBay
When eBay bought the company, it hoped buyers and sellers would use the service to negotiate auctions on the site. But while Skype has become popular, it never integrated into eBay the way then-CEO Meg Whitman had hoped, and in 2007, the company wrote down Skype's value to $1.2 billion.
Zennstrom and Friis had sought an injunction against the sale, as well as statutory damages at an eye-popping rate of "more than $75 million daily." Additionally, in a barrage of lawsuits, they accused Volpi, the former chief executive officer of Internet TV servicde Joost -- which Zennstrom and Friis also founded -- of breaching his fiduciary duty by stealing confidential information in an effort to seal the eBay deal for the consortium.
The suits accused Volpi of lying, stealing and bad faith by gaffling confidential information for the consortium. Last summer, Volpi became a partner at Index Ventures -- a member of the consortium -- after leaving Joost as the chief executive. He remained as chairman of the startup, but Friis and Zennstrom kicked him to the curb after they found out about his alleged double dealing.
In one e-mail Zennstrom and Friis produced for the court, Volpi plotted the Skype bid with Danny Rimer, a partner at Index. Volpi's e-mail refers to various players involved with Skype, and Volpi's hope to remain chairman of the company.
"Could be cool," Volpi writes, according to the document. "J/N/Dyne will be very unhappy, but ... oh well."
J/N are Janus Friis and Niklas Zennstrom, and Mark Dyne is a Los Angeles banker and former Skype board member.
Although the deal may now go through, Volpi, a 42-year-old former Silicon Valley golden boy once rumored to be a possible successor to Cisco's John Chambers, has suffered serious damage to his reputation.
"Even if we give Volpi the benefit of the doubt and assume he prevails on the legal issues, his actions and behavior are likely to put a considerable dent in his reputation," wrote San Jose Mercury News columnist Chris O'Brien. "Volpi seems to have grotesquely underestimated how upset the Joost founders would be. In case you're wondering, the answer appears to be: VERY ANGRY."
Too bad for him, Zennstrom and Friis may be thinking. After all, they felt burned by Volpi and sought to strike back against him. It's a cautionary tale for would-be Valley machers: don't mess with this pair.