Skype under threat, says eBay

eBay has warned that a legal dispute with the co-founders of web-based voice over IP (VoIP) provider Skype, which the online auction giant acquired in 2005, threatens the future of that service.

When the company’s co-founders, Niklas Zennström and Janus Friis, sold Skype to eBay, they retained the licensing rights for a crucial piece of peer-to-peer software on which the Skype platform relies. Zennström and Friis’s new company, Jotlid, claims that Skype is now in breach of the licensing agreement to use that software, and are threatening to terminate the agreement.

In response, Skype has begun developing software that it could use as an alternative. But in its yearly financial report published this week, eBay has warned investors that “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”.

The auction giant added that if a software alternative failed or Skype lost the right to use the technology, “the continued operation of Skype’s business as currently conducted would likely not be possible".

eBay has previously stated that it intends to spin off Skype in an IPO next year. However, with the dispute with Jotlid due to court in June 2010, this now appears unlikely.

The auction giant was forced to write down the value of Skype from $2.6 billion to $1.4 billion when expected synergies failed to materialise.

Nonetheless, Skype continues to dominate the consumer VoiP market and has made successful forays into the small business market. It is now one of the largest ‘carrier’ networks, and while its performance may not have validated eBay’s optimistic buying price, Skype’s second-quarter reveunes this year rose 25% to $170 million.

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