Skype Fires Executives, Avoiding Payouts After Microsoft Buyout

Just after the Federal Trade Commission approved Microsoft's purchase of web calling service Skype, Bloomberg reports that Skype will fire a number of top executives.

At least eight Skype chiefs were reportedly let go in a move that will reduce the cost of company payouts. "As part of a recent internal shift, Skype has made some management changes," a Skype spokesman told Bloomberg.

Firing employees before the Microsoft deal is complete pushes the value of Skype's stock options lower than it would have been had these execs stayed until the deal was fully complete.

Some critics point to the firings as a potential sign of trouble for the joint future of Microsoft and Skype.

"This is a pretty short sighted strategy and it is only going to make integration of Skype into Microsoft more difficult," GigaOm writes. "It seems that this is a pennywise, pound foolish kind of a move, that in the end is going to erode the value of the Skype franchise."

GeekWire concurred, noting that Skype is meant to operate independently once it joins Microsoft:

The move is a surprise in part because Skype is expected to operate as its own division inside Microsoft following the completion of the $8.5 billion deal [...] While it's not unusual to see management changes accompany major acquisitions, it would have made sense for Skype to retain its existing executives to continue operating the business inside Microsoft.

Microsoft agreed to pay $8.5 billion for Skype in early May, making it Microsoft's biggest purchase ever. The Redmond company reportedly outbid the likes of Google for Skype and will integrate the calling service into Microsoft devices like Xbox.

Microsoft will pay three times the value Skype previously held when eBay sold a two-thirds share in the company to equity firm Silver Lake in 2009. Following the FTC's approval, the deal will next be reviewed by the Department of Justice.

Comments

[NewLiberals]

11:34 PM on 06/21/2011

Embracing the Microsoft corporate mindset right from the beginning.

Claw your way to the top then settle into a death spiral.

[Mabeline]

02:52 PM on 06/21/2011

I love Skpye and use it daily. As soon as I heard MS was buying it, my love of it diminished because I have to go to some other service. MS will ruin it. This is already starting. Too bad. Those executives helped build the value that MS decided to pay...they should reap of their hard work.

[elishe101]

11:57 AM on 06/21/2011

Now that Microsnot has its hands in Skype, I'll never use it again.

[Rick2783]

11:16 AM on 06/21/2011

This merger will ultimately fail. Skype sealed it's fate when they partnered with Microsoft.
Too bad. It could have been a cool thing.

[Sundialsvc4]

10:16 AM on 06/21/2011

It strikes me that, in the tight-knit world of technology, this is an insane thing to do.

By the end of this day, Skyperosoft will have many hundreds of millions of dollars worth of legal exposure to deal with as, I am quite sure, every one of these executives sues the conglomerate for wrongful termination.

[sassafra]

07:46 AM on 06/21/2011

releasing high level executives "with prejudice" like this isn't the greatest of ideas, especially if you wish to supress the release of your new acquisition's "dirty laundry" to the press by disgruntled anonymous sources.

[jagrmeister721]

11:20 PM on 06/20/2011

OK, so I did some research into why this happened.  While some speculate the reason was so Silver Lake and other execs could milk the acquisition for more dollars (avoid dilution coming from the vesting of the 8 executives), that reasoning is a bit dubious- because it's a small percentage compared to the risk associated with this kind of management shakeup.  The likely reason is that Skype's CEO came in 8 months ago- and usually when this happens- they conduct a review of top executives, keep the ones they think highly of, remove others, and bring in their own team.  The CEO was told he needed to be able to run Skype as an independent company if the acquisition wasn't approved by regulators or as an independent business unit within MS.  So he made those changes to management to get in effect his own team in place.

[mountainweb]

07:49 AM on 06/21/2011

That sounds more like the reality of moves like this because, bottom line, he just lowered his day to day payroll costs and yes for sure did reduce the payout. Either way the new CEO looks good, sadly as always, at the cost of what may have been some good managers.

As a business unit within MS, he made it look better going in, more chance they will keep him for a while...

[Liosatos]

02:27 PM on 06/21/2011

that's the ticket.. do a little research before you make assumptions.. good info thx..

[AcaciaJules]

11:04 PM on 06/20/2011

What idiot made that decision? It's such a sign of business in America today, totally short sighted about everything.

[thebuzzmanisone]

09:41 PM on 06/20/2011

ha now they know how they treat their average workers.

[petey64]

07:55 PM on 06/20/2011

a question wouldn't they have to have some sort of payout anyway?

[EH14SCUSA]

04:37 PM on 06/20/2011

"At least eight Skype chiefs were reportedly let go in a move that will reduce the cost of company payouts."
.........now these guys can know how it feels to be a business WOMAN...it happens ALL the time!

[Majestry]

04:40 PM on 06/20/2011

No, it doesn't. Women make $.98 for every dollar a man makes when factoring in for experience and education and women under the age of 30 are making MORE than men. In some cases, as much as 117%.

[Paula YesIhaveone]

06:21 PM on 06/20/2011

What are you smoking? Try again.....women make on average around 0.78 for every dollar that a man makes.

Males still rule the world, sir. Step away from the "wacky backy" and get a clear head.

[joocee102]

09:54 PM on 06/20/2011

Women make 3/4 of what a man makes salary wise. Plus, women have to go through an emotional gauntlet everyday created by men. Do we honestly believe women have any real fuxcing interest in Fantasy football, or keeping up with the latest ESPN sport's statistics? NO! Women are just playing a man's game in the hopes that they'll(women) will move up the ladder of success or likable enough to keep their jobs.

[ramblingjohnny]

04:18 PM on 06/20/2011

The gutting is starting anybody who still believe that Skype will not be integrated inside Microsoft is deluding themselves!

[huffingtonsurferdude]

03:32 PM on 06/20/2011

Skype is (was) great. So now Big Bidness will have to eat it and ruin it. The majesty and glory of the free (sic) market (sic).

[centsable]

03:30 PM on 06/20/2011

LOL...so much for company loyality.

[datdamonfoo]

03:19 PM on 06/20/2011

Amazing what the moronic Apple fans are saying on this thread. Microsoft does not yet own Skype, so they have nothing to do with this. They won't ruin Skype either, just look what they did with Primasense's technology (now incorporated into Kinect). I love how the fools on here are saying that Microsoft is dying or offering sickly products when they are making more money than they ever have, still own 92% of the worldwide OS market, still have the number 1 selling gaming system for 11 out of the past 12 months, and have the top-rated phone (on AT&T, second overall).

"The reports of my death are greatly exaggerated."
-Mark Twain

[nnyl]

03:49 PM on 06/20/2011

It could go either way...I was a Hotmail user before Microsoft bought it and the service degraded after the purchase. I more or less quit using it (still have the account for when I sign up for something and don't want spam in my main account), but a few years after the MS purchase mail delivery became a bit unpredicatable.

And I am not an Apple fan...I don't use any of their products. I have some MS stuff and some Linux stuff. No ipod, ipad, or iphone.

[datdamonfoo]

04:18 PM on 06/20/2011

I'm not a hotmail user, but it seems to suit my parents fine. It is also now currently the world's largest web-based email service, so Microsoft must be doing something right. Also, from what I have read, they have put a lot of new innovations into Hotmail. In 2007, it also won a PC Magazine award, so perhaps the issues you had with it are no longer relevant.