Skype’s future just got cloudier. In a regulatory filing this week, Ebay, which in 2005 acquired Skype for a final price of $3.1bn, said it might shut down the internet telephony service if it can’t resolve a legal dispute with Skype’s founders or develop an alternative technology.
The technology used to power Skype is still owned by the company’s founders, Niklas Zennstrom and Janus Friis. Their new company, Joltid, licenses the technology back to Ebay.
But Joltid has accused Ebay of violating the terms of that agreement by using parts of the code it did not license, and has threatened to withdraw the technology. Ebay has asked a British court to intervene, and the case is pending.
In this week’s filing, Ebay said that while it expects to prevail in court, it was working to develop an alternative to the Joltid technology.
“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.”
The outright closing of Skype would be profoundly disruptive. Skype this year became the largest carrier of international voice traffic, and has more than 400m active users.
It is also a fast growing business unit for Ebay, recording $550m in sales last year, a 44 per cent year-over-year increase. Despite its strong performance, Ebay in April said it would spin off Skype with an initial public offering in 2010, an admission that Skype has few synergies with Ebay’s shopping sites.
But with a lingering legal dispute with Joltid and uncertain technological alternatives, Skype’s long-term future, and the viability of its IPO, are not at all clear.
