Winners & losers in the Microsoft-Skype deal

Investors, eBay, and Skype founders come out on top; Microsoft overpaid and Index Ventures suffers

Now that Microsoft's $8.5 billion acquisition of Skype is a done deal, it’s time we take a look at some details of the purchase. Whatever you think of the final price on Microsoft’s end, that cash is actually getting sliced up in a few different ways.

Here are the winners and losers in the deal.

Winning

Silver Lake and other investors: The biggest winner in this deal, of course, are the investors that collectively owned a 56 percent stake in Skype, after purchasing the company from eBay in a deal that valued the VoIP software at $2.75 billion. Silver Lake (with Egon Durban, pictured, as managing director), Andreesen Horowitz and the Canada Pension Plan Investment Board (CPPIB) were the three investors in that earlier deal, though our sources say that the lion’s share of the investment came from Silver Lake. Either way, the three are sharing $4.76 billion. Not bad at all.



eBay: Many people today have been poking fun at eBay for selling Skype so cheaply not even two years ago. But that’s not really fair. Once the company had finalized the sale of Skype to Silver Lake back in November 2009, it emerged that eBay had made out with $1.9 billion in cash, not even a quarter of Microsoft’s deal today. But, in addition to the cash, eBay also retained an approximately 30 percent equity investment in Skype. So they spent $2.6 billion originally, resold for $1.9 billion and today they just got another $2.55 billion.

In retrospect, eBay CEO John Donahoe, pictured, may have actually been able to wrangle more out of his buyers if he had further developed Skype as a business, as Silver Lake has done. Or, even better, maybe he should have pitched the sale to Microsoft from the beginning. It sounds like they have cash to blow.

 Skype founders: When eBay was selling Skype to Silver Lake 18 months ago, the buyer and seller settled with Skype’s original founders, Niklas Zennström and Janus Friis (pictured), granting them a 14 percent stake in the company. So the original creators get $1.19 billion, a fair exit.

Losing

Microsoft: Everyone seems to think they overpaid. After all, they ended up doling out more than double what Facebook was rumored to be willing to pay, and even that price point was at the high end. While the service is nothing to joke about, with over 660 million worldwide users, it’s not exactly a cash machine. Last year, Skype reported revenues of $860 million with a net loss of $7 million. The challenge for Microsoft is drawing out the service’s true value by integrating it into all of its various outlets and platforms, including Windows Phone 7, Messenger and Hotmail, Exchange and more.

Index Ventures: The early and growth stage venture capital firm should today be enjoying a piece of the pie along with the other investors listed as the number one winners, but partner Mike Volpi let those hopes wither away. Though Index Ventures was originally part of the deal, Skype founders Zennström and Friis filed suit against Volpi (a former Skype board member) for violating an IP agreement and using information he had gathered as CEO of Joost (another company founded by Zennström and Friis) to unfairly position Index in the deal. The motion stalled the deal until all parties settled, as described above. And Index Ventures comes out with nothing.

We've reached out to all involved parties and will update this post when we receive replies.

Here's eBay's response:

“Skype is a great business with a strong future. This deal represents Skype’s long-term growth potential. And, it gives our shareholders a strong return of approximately $1.4 billion on our original investment for a dynamic business that simply wasn’t core to our focus on global payments and commerce.”