Skype Founders Settle With eBaySkype Founders Settle With eBay

Skype founders Niklas Zennstrom and Janus Friis won a heated battle with eBay and captured a 14% stake in the VoIP firm they previously had sold to eBay for billions of dollars.

The new deal gave the reconstituted Skype rights to the software. Zennstrom and Friis had been seeking to block use of the software that enables Skype to operate.

When eBay acquired Skype in 2006 it neglected to acquire the software that powers the VoIP calling firm. Zennstrom and Friis had threatened to close down Skype, claiming damages of $75 million a day.

The settlement was announced by eBay president and CEO John Donahoe, who said: "Skype will be well positioned to move forward under new owners with ownership and control over its core technology. At the same time, eBay continues to retain a significant stake in Skype and will benefit from its continued growth." eBay had decided to spin out its Skype unit, because it didn't provide the hoped-for synergy with eBay's online auction business.

eBay said Zennstrom and Friis will join the new Skype investor group and make "a significant capital investment in exchange for a 14% stake in Skype." The amount of the founders' investment was not disclosed.

Skype is now constituted as follows: private equity firm Silver Lake, venture capitalist firm Andreessen Horowitz and the Canada Pension Plan Investment Board will hold 56% and eBay will retain 30%.

The deal, announced Friday, closes the latest tumultuous chapter surrounding Skype, which revolutionized the IP telephoning market; tens of millions of Skype members can call each other for free while Skype members can call non-Skype numbers for a few pennies a minute.

Friday's settlement also excludes Index Ventures and presumably one of its principals, Mike Volpi, from the deal. Volpi had a longtime working relationship with Zennstrom and Friis, but the founders had sued Volpi in bitter litigation. Danny Rimer of Index said the "deal terms changed for Index such that it no longer matches our investment criteria and thus we have decided not to participate in the transaction."

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