eBay Loses Skype CEO and Takes Charges (EBAY)

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eBay Inc. (Nasdaq:EBAY) has announced this morning that Niklas Zennstrom has stepped down as CEO of Skype. Zennstrom, who co-founded Skype in 2003, will become non-executive chairman of the Skype Board of Directors. Michael van Swaaij, eBay’s Chief Strategy Officer, will become acting CEO until a permanent successor is found.  Henry Gomez, Skype’s President, who remained a Senior Vice President at eBay during his two-year tenure at Skype, will return to eBay as Senior Vice President for Corporate Affairs, reporting to President and CEO Meg Whitman.

eBay also announced that it has paid approximately $530 million (in Europe) to settle all of its future obligations under the earn-out agreement signed with certain Skype shareholders when eBay acquired Skype in 2005.  eBay expects that the approximately $530 million payment, together with an additional amount of approximately $900 million, will be taken as an impairment charge to be recorded as part of its Q3 financial results.

This likely won’t impact non-GAAP earnings per share by anything drastic but will create a change to analysts’ cash flow expectations and to GAAP net income expectations for the quarter.  Interestingly enough, eBay lists over $6.9 Billion in Goodwill of its entire $14.36 Billion assets.  The good news is that it only listed $2.8 Billion in total liabilities at the end of last quarter (before these charges of course), so the online auction king can quite easily ride this one out.

Jon C. Ogg
October 1, 2007