eBay Finally Gives Up Looking For Mythical Skype Synergies

Deals

from the it's-all-over dept

When eBay first surprised plenty of folks by buying Skype in 2005, the company insisted that there were plenty of synergies between the two companies — despite them being quite hard for anyone to see (and for eBay management to explain). They trotted out a couple of ideas that were easily shown to be false. All of this was finally confirmed last year when eBay wrote off much of the acquisition. Now, finally, eBay is admitting that there really are no synergies between the two, even though it apparently spent about two years trying desperately to find them. In talking about how Skype faltered after merging with eBay, Skype’s latest General Manager admits that looking for synergies between the auction business and the VoIP business are a thing of the past: “There is less focus at eBay today on finding the place where eBay and Skype intersect on the web, on using mashups to create a new communications paradigm for eBay, and more focus on Skype growing its business and eBay growing its business.” Why that only cost a few billion dollars to figure that out.

Filed Under: mergers, synergy
Companies: ebay, skype

Net2Phone Jumps Into The VoIP Patent Lawsuit Business: Sues Skype

Legal Issues

from the everyone's-doing-it dept

In the last year, we’ve witnessed plenty of companies dig up VoIP patents with which to sue market innovator Vonage. Verizon, AT&T, Sprint and Nortel all were able to get Vonage to cough up some money, rather than continue to fight some questionable patents. The fact that there are so many overlapping patents, is exactly the “patent thicket” problem that our current patent system encourages. Of course, there are always more patents to choose from, and it appears that Net2Phone has dug out an old patent and decided not to sue Vonage, but to go after Skype instead. Unfortunately, there’s very little in the way of detail. The ZDNet post just claims it happened, but doesn’t give any details about the actual lawsuit (even where it’s been filed). Also, the writer seems amazed that it’s based on a patent filed in 2000, even though it’s common enough to see old patents used in patent lawsuits. In this case, it’s absolutely true that Net2Phone was an early pioneer in the VoIP space, but saw its business eclipsed when it had trouble coming up with a product people actually wanted to use (and then watched as providers like Skype passed them by). If anything, this seems like yet another example of those who lost in the marketplace punishing those who innovated better. Skype came up with a good product that people wanted to use. Net2Phone did not. It’s hard to see why Skype should be punished for doing a better job serving the market.

Filed Under: patents, voip
Companies: net2phone, skype

German Government Struggles To Tap Encrypted Skype Calls

(Mis)Uses of Technology

from the crypto-works dept

The Wikileaks project is starting to bear fruit, with documents leaked to the site beginning to get a lot of attention. The latest example is correspondence between the German government and a vendor (via Slashdot) that apparently makes software for intercepting Skype calls. Interestingly, the interception technology appears to be pretty primitive and rather expensive. The software has to be installed on the Skype client, and the vendor suggests that this can be accomplished by attaching a trojan to an e-mail or physically entering the premises to install the software on the target machine. And, evidently, only Windows 2000 and XP are supported; Vista support is still in the works. The company charges thousands of euros per target computer. This suggests that Skype’s encryption technology is secure against at least the eavesdropping techniques available to the German government. Apparently they haven’t found a way to decode encrypted Skype traffic off the wire, so they’re forced to resort to these fairly cumbersome attacks on Skype clients — attacks that are no more convenient for law enforcement than simply bugging the target’s office. That suggests that the risk of comprehensive government surveillance of online telephony is still a fair ways off. If you encrypt your online activities, they’re probably pretty secure. Of course, it’s entirely possible that other government agencies, such as the NSA, have more sophisticated eavesdropping technology that they haven’t shared with the Germans. My guess is that any government agencies possessing really sophisticated eavesdropping tools are also less likely to have their private documents show up on Wikileaks.

Filed Under: encryption, germany, skype, trojans, voip, wiretapping
Companies: skype

Is LinkedIn The Latest To Play The Skype-Hype Valuation Bubble Game?

Rumors, Conspiracies, etc.

from the anyone-taking-bets-on-the-final-amount? dept

Over the past few years, we’ve noticed a pretty consistent pattern among startups trying to create huge valuations for themselves in a short period of time. While other companies have done it in the past, the latest cycle really kicked off with Skype confusing people into thinking it was worth billions. Despite having relatively low revenues, there suddenly leaked rumors that Skype was for sale. Skype denied it, and then had one of its investors say the company was worth well over a billion. Then the feeding frenzy began, until eBay came out the winner — a move it later regretted. Facebook was the next to follow the Skype Hype Strategy, but may have been a bit too early to the game. It took an extra year, but the company may have outdone Skype in its $15 billion valuation (though, unlike Skype, Facebook hasn’t turned that into real cash yet). In between, YouTube used a nearly identical strategy to pump up its valuation.

Here’s what you do: get a little buzz. Leak a report to the press about a buyout offer. Deny the reports of the buyout offer and then have either an exec or an investor make an offhanded remark about how the company is actually worth billions, allow the feeding frenzy to begin and eventually pick an exit opportunity. It also doesn’t hurt to have some sort of PayPal connection (which both Facebook and YouTube had). The latest to test out this strategy may be LinkedIn, which also has the PayPal connection. Last week the rumor broke that News Corp was trying to buy LinkedIn. The company’s CEO quickly denied the report and said that the company would need to sell for “a lot more” than a billion dollars. Now, the latest reports are that News Corp isn’t buying LinkedIn, but just like those other stories, the stage has now been set. Suddenly others may start thinking that perhaps LinkedIn is a good buy for over a billion dollars, and the feeding frenzy begins again. Anyone want to take guesses on the next startup to play this game?

Filed Under: buyout, hype, rumors
Companies: facebook, linkedin, news corp, skype, youtube

eBay Evaporates $1.43 Billion In Supposed Skype Synergies

Failures

from the not-quite-so-good dept

eBay made a few announcements this morning concerning Skype, and while the press seems focused on Skype founder/CEO Niklas Zennstrom leaving the company, that’s hardly the interesting part of the announcement. Instead, the important news is in the fine print, concerning how much eBay is paying Skype as an earnout. Back when eBay bought Skype, there was an initial payment, and then an earnout based on how many new users and how much revenue Skype brought in. At the time, we noted that Skype really didn’t have that many users and while it was a good product, we didn’t see the synergies with eBay. Two years in, and it seems that this view was correct, as the supposed synergies never showed up. And, while Skype has continued to grow, the pace has certainly slowed. Back when the company was bought, at peak times there were usually around 5 to 7 million users online. These days, it seems like it’s usually 8 to 10 million. That’s not bad, but it’s hardly astounding growth.

And, in fact, this slow growth is clearly seen in the earnout. eBay only had to pay an additional $530 million — well short of the $1.7 billion maximum payout, clearly suggesting that Skype’s growth has been a lot weaker than the company had hoped. To underscore how poorly Skype seems to be doing compared to eBay’s plans, the company is also taking a $900 million impairment charge to write down the “goodwill” associated with the Skype acquisition. Ouch. That hurts. It’s also leading to calls from all over about how eBay should sell off Skype, admitting defeat in an acquisition that never made sense in the first place. The funny thing is, a big part of the reason why eBay ended up paying so much for Skype in the first place, was due to a ridiculous and misleading hype frenzy (in part, based on a typo). You would think that eBay, of all companies, would recognize the buying frenzy created by an auction situation — but apparently not. As for Zennstrom, it hadn’t really seemed like he was all that engaged at Skype anyway, and the timing of his departure coincides with the launch of his new product, Joost.

Filed Under: earnout, niklas zennstrom
Companies: ebay, joost, skype

The Age Of Good Enough Technologies: Redundancy Getting Distributed To The Edge

Predictions

from the five-9's-is-so-20th-century dept

Following the Skype outage last week and the big SF data center outage last month, Business Week is exploring the fact that today’s technology is often at the “good enough” level, rather than being designed to withstand a nuclear attack. We’ve certainly had previous examples of this as well. What may be more interesting, however, is that people are basically creating their own redundancies, rather than leaving it up to the service providers. In other words, redundancy is getting decentralized. Rather than making sure that a service provider can keep mission critical services up at all times, we’re all learning to create our own personal backup plans. In the article, it discusses how Andy Beal of Marketing Pilgrim basically “backed up” his Skype phone account with his mobile phone. This is true in other areas as well. I have a DSL connection at home, but if it goes down (all too often, unfortunately) I have both an EV-DO account and a (in those really desperate times) dialup account. My email is available at a web-based service… but also downloaded to a local client. In other words, knowing that many of these services are really only “good enough” I (and many others) have simply started creating out own backup system for mission critical services. Of course, many of these redundancies offer additional features and benefits, but it’s certainly distributed the “general uptime” responsibility out to the end-users rather than the central service providers.

Filed Under: redundancy
Companies: skype

From Hedge Funds To Skype, Collapses Prove Unavoidable

Failures

from the crashing-down dept

Is there a connection between the recent meltdown at quant funds and last week’s outage at Skype? Nick Carr makes the provocative argument that both events are the result of what happens when algorithms fail to anticipate behavior that is somehow out of the ordinary. In the case of quant funds, their models failed to anticipate the market’s wild volatility, whereas with Skype (if you believe the company’s official explanation), the glitch was the result of mass reboots taxing network capacity. Interestingly, both Skype engineers and hedge fund managers were heard using the phrase “perfect storm” to describe the sequence of events that lead to their respective collapses. Of course, as hedge funds learn every few years, these perfect storms that are mathematically supposed to occur just once in a thousand years, seem to happen quite a bit more often. The same goes for any network that suffers an outage despite the best laid contingency plans. The problem is that it’s difficult to craft an algorithm or a model that’s robust during ‘normal’ times and abnormal times. In finance, one hopes that the profits are big enough during the good so that you can survive the occasional mess. The one problem, of course, with the comparison between hedge funds and Skype is that Skype’s explanation doesn’t ring particularly true. The connection between Microsoft patches, mass reboots and the network collapse seems tenuous at best. Thus, it’s entirely possible that this particularly outage had nothing to do with abnormal crowd behavior. Still, as the surprise outage at 365 Main demonstrates, it’s difficult, if not fully impossible, to completely inoculate oneself against adverse events.

Filed Under: algorithms, hedge funds, quant
Companies: skype

Skype's Explanation For Downtime Not Ringing True

(Mis)Uses of Technology

from the something's-missing-here dept

It took quite a while, but Skype was finally able to get its service back up and running after extended downtime last week. Monday morning, Skype posted an explanation of what happened, but it has many of us scratching our heads — and many professionals questioning Skype and trying to match up the official explanation to reality. Skype officially blamed all the rebooting Windows computers due to Windows latest security patch. It must be nice to blame Microsoft, but it’s hard to understand why that should be the problem. First of all, Microsoft security patch updates happen pretty regularly (normally once a month), often requiring the same reboot process. Why would this time suddenly be different than every time in the past? Skype doesn’t explain that. Second, and much more importantly, the service crashed at 3am PT on Thursday morning. That’s about 24 hours after most computers would be rebooting. Microsoft comes out with its patches on Tuesday, and most computers then do the reboot in the early hours of Wednesday morning, not Thursday morning.

Filed Under: downtime
Companies: ebay, skype

Skype Outage Highlights How Skype Is A Bit More Centralized Than Expected

(Mis)Uses of Technology

from the p2p-or-p2c2p dept

Lots of folks (including many of us here at Techdirt) have discovered that VoIP/IM service Skype is having a pretty massive outage right now, where most, if not all, Skype users simply cannot login. There are plenty of alternatives for people to use, but for those who are used to using Skype (or who use it as a phone replacement, as some do), it’s probably a bit of a nuisance. Still, this has to raise some questions. Part of the value of P2P networks was supposed to be their lack of a central point of failure. The idea was you couldn’t easily take down (or censor) a P2P network for that reason. With Skype, the fact is that it wasn’t completely a P2P app, as the authentication was still centralized. However, this may make some people wonder. After all, there were accusations in the past that Kazaa wasn’t really decentralized, and it was Kazaa’s founders who built Skype — and some have said that they simply reused Kazaa’s underlying code in building Skype. So, don’t be surprised to see some question how decentralized Skype really is after seeing a failure like this one.

Filed Under: outage, p2p, skype
Companies: skype

eBay's Core Auction Business Is Looking Like A Drag

The Market

from the show-me-the-money dept

eBay has reported its latest quarterly earnings, and like Intel’s latest results, they offer something of a mixed bag. eBay’s revenues and profits are up strongly, but its auction business is stagnating. While it showed revenue growth in the quarter, that’s attributed to currency effects and increased commissions for sellers, rather than growth in the number of listings or the value of goods sold. eBay’s been able to generate growth by expanding its scope of operations, which is certainly helpful, but the weakness in its core auctions business remains a concern. Questions still remain about some of those expanded operations: for instance, though Skype’s earnings grew, usage is flat. But perhaps the bigger problem for eBay is that it’s struggling to get the new units to feed off of each other. Buying PayPal was a masterstroke for the company, since a simple and comprehensive payments system delivers benefits to (and derives benefits from) the auctions business. But other new businesses don’t integrate so well. Part of the justification for buying Skype was to ease communications between eBay auctions’ buyers and sellers, but that hasn’t panned out, or turned into a money-spinner. Similarly, some observers say the US launch of its Kijiji classifieds site will drive usage of Skype and PayPal, but judging by the Skype acquisition, that’s far from being a sure thing. Clearly eBay’s got the ability to get some M&A work done, but its ability to meaningfully integrate its purchases to spur growth among its other businesses still isn’t so clear.

Filed Under: ecommerce, m&a
Companies: ebay, kijiji, skype