Skype founder: eBay paid too much for us

Analysis

Niklas Zennstrom has admitted that Skype's earnings projections were a „a bit front-loaded” prior to its acquisition by eBay.

Niklas Zennstrom, the co-founder of the internet phone service Skype, has suggested that the start-up was overvalued when it was bought by eBay, but said that the company would turn out to be a good business „over the longer term.” In his first interview since stepping down as the chief executive of Skype last week, Zennstrom said that the revenue projections made by his team prior to being bought by eBay, the auction house, were „a bit front-loaded,” and that he felt the company had „tried to monetise too rapidly.”

Last week eBay, which bought Skype for $2.6 billion in 2005, said it would take a $1.43 billion charge in relation to the acquisition - a write-down that was widely seen as a concession that it had overpaid. In remarks made at a technology conference in Hungary, Zennstrom defended Skype's value, saying that it in the second quarter its earnings had grown by 100% from a year earlier, to $90 million, and that the company had recorded a profit in the first quarter.

Analysts claim that despite having an estimated 220 million users worldwide, Skype's service - which allows people to make phone calls via the internet using their computer - has failed to generate significant revenues. According to an estimate, by Gartner, the company earns an average of £1.10 from each user per year.

Zennstrom told delegates at the ETRE conference in Budapest (7-10 October) that investors needed to „look at the long term value of a company” and that Skype's position in the market had strengthened. „It's not like it's been overtaken by Microsoft or Google or Yahoo,” he was quoted as saying. „Over the longer term, I think it's going to turn out to be a good business.” (Read more: timesonline)

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