EBay overpaid for firm: Skype co-founder
BUDAPEST (Reuters) - Niklas Zennstrom, co-founder of Internet telecoms company Skype, said on Tuesday he agreed the original valuation put on the company by purchaser eBay (NasdaqGS:EBAY - News) was too high. — "We had to chart the trajectory …
Context & Ripple Effects
This admission lands one week after eBay replaced Skype's CEO and wrote off $1.43 billion, formally conceding that the acquisition has not delivered what was promised when it closed. Skepticism has been building since at least mid-2006, when coverage questioned whether eBay's plans for Skype were convincing and analysts were still waiting for Skype to pay off.
What makes Zennstrom's statement notable is who is saying it: the seller's own co-founder agreeing that the valuation was too high removes the last line of defense for the deal price. With Silicon Alley Insider having already declared eBay's Skype experiment bombed, the founder's concurrence turns a financial write-down into a public verdict on the deal itself.
First-order effects
- Zennstrom's agreement that the original valuation was too high strips away founder-side justification for the deal price, leaving eBay with no credible narrative that the premium reflected insider knowledge of Skype's trajectory.
Second-order effects
- The admission hands eBay's critics and shareholders a definitive reference point for valuing future acquisitions, raising the bar for any premium eBay pays on unproven revenue models — and pressuring the company to show a concrete path to monetizing Skype rather than another strategic relaunch.
Third-order effects
- If sellers themselves begin conceding overpayment after the fact, internet M&A should shift toward deal structures that tie payouts to realized performance — earn-outs and staged payments — rather than upfront premiums built on founder projections.
The trend: Large internet acquisitions priced on projected growth are entering an accountability phase, where write-downs and seller admissions force acquirers to pay for demonstrated results instead of forecasts.