Skype price falls as deal with eBay fails to deliver

ONLINE auction giant eBay has said it would cut as much as $1.2 billion off the $4.3bn potential price it agreed to pay for web-based phone-calling service Skype two years ago.

The writedown on the value of the deal came as eBay said Skype co-founders Niklas Zennstrom and Janus Friis had resigned as executives, and marks a tacitadmission of lacklustrereturns from Skype since eBay acquired it two years ago.

EBay said it would pay €375 million to Skype shareholders and take a charge of $1.4bn against eBay’s third-quarter results, due out later this month.

“I think this is a testament that the Skype franchise is not worth as much as eBay originally thought,” said Wall Street analyst Youssef Squali of brokerage Jeffries & Co.

Shares of eBay hit an 18-month closing high of $39.66 — up 1.6% — on Monday, reflecting the lower price the online auction leader is paying for Skype and the greater flexibility eBay may now have to put Skype on a new course,analysts said.

The stock is up more than 20% since late August.

“If you take Skype out of the equation, the rest of the eBay business seems to be doing great again,” saidPacific Crest Securities analyst Steve Weinstein.

EBay’s deal to acquire Skype was controversial with investors. A key justification of the deal was eBay’s intention to stoke growth in its core auction business and by call-billing payment tie-ins between Skype and eBay’s PayPal online payments service.