Skype Evading Payouts, Firing Executives Before Microsoft Takeover

Senior executives of Skype Technologies SA, the Internet-calling service being acquired by Microsoft Corp. (NASDAQ: MSFT), has departed following its $8.5 billion buyout.

Microsoft's acquisition of Skype was approved last week by the U.S. Federal Trade Commission. Microsoft said when it announced the deal that it expects to obtain all necessary regulatory clearances by the end of year.

After May 10 announcement of Microsoft's largest M&A deal to date -- the acquisition of Skype for $8.5 billion in cash from an investor group led by Silver Lake Partners -- the company has not made public any new Internet-related corporate/strategic activity.

Microsoft plans to incorporate Skype into a variety of platforms, including the Xbox and Kinect gaming devices, Windows Phone and other communications services it offers including Lync and Outlook. Skype offers voice and video calling over the Internet and is primarily used by consumers.

Following the completion of the deal, Tony Bates, chief executive officer of Skype, will become the president of the Microsoft Skype Division, reporting directly to Steve Ballmer, chief executive officer of Microsoft.

I believe this acquisition is the very best way to extend Skype’s reach and will allow us to bring real-time video and voice communications to more people around the world than ever before. The combination of Skype and Microsoft will directly benefit all of you who use Skype by ushering in a new era of generative ways for everyone to communicate, said Bates.

In our view, Microsoft has not done a good job for the mobile market and missed on the mobile Internet revolution. Its partnership with Nokia Corporation (NYSE: NOK) and acquisition of Skype seem like moves in the right direction but we are concerned about the reaction to these deals by other stakeholders in the mobile ecosystem, said Sandeep Aggarwal, an analyst at Caris & Co.

Although, the dismissal is largely being kept under wraps, it has been known that the vice presidents David Gurle, Christopher Dean, Russ Shaw and Don Albert were dismissed from the Luxembourg-based Skype, the Bloomberg reported citing people familiar with the matter. Chief Marketing Officer Doug Bewsher and Anne Gillespie, head of human resources, were also fired.

Executives Ramu Sunkara and Allyson Campa, who joined Skype following its acquisition earlier this year of video-sharing utility Qik, were also fired. Six of the departures were previously reported by Skype Journal, a blog that covers the company, which claimed that these dismissals were part of 'recent internal shift owing to some management changes in the company'.

The timing of the dismissals means stock options will be worth less than if the executives stayed until the closing of the $8.5 billion deal, the people told Bloomberg. Due to the dismissals, Skype's total stock worth, which earlier stood at $8.5 billion, has now considerably come down and therby considerably slicing off their payout value.

Online auctioneer eBay Inc. (NASDAQ: EBAY) acquired Skype in 2005 for $2.6 billion, but sold it in November 2009 to an investor group led by Silver Lake Partners.

Skype had an average of 145 million connected users per month in the fourth quarter of 2010. Skype users made 207 billion minutes of voice and video calls in 2010, about 42 percent of which was video.