Skype Sale Suffers Setback

Skype founders Janus Friis and Niklas Zennstrom recently filed a lawsuit against eBay Inc. (EBAY - Analyst Report), claiming that there had been a breach in agreement by which it licensed key communication technology enabling phone calls over the Internet. Joltid Ltd., a firm owned by the co-founders, estimates that damages could amount to as much as $75 million per day.

This is not the first time that has filed complaints. In the U.K., lawsuits over global index software have been continuing for some time. Joltid stated that the technology licensing agreement had been terminated as Skype had obtained unauthorized copies of the source code and sold modified versions to third parties. However, Skype stated that the allegations were without merit.

After buying Skype back in 2005, eBay made a subsequent payment of $530 million to its technology founders. It also wrote off $1.4 billion in 2007, as the initial purchase price was too high.

The sale of the 65% stake in Skype to private equity firm Silver Lake would be a positive for eBay, as it would bring home some immediate cash, aid focus on its core business and also leave open a healthy stream of cash flows for the future.

The sale would also be a positive for Skype, allowing it to focus on the development of the core technology. Moreover, Silver Lake owns telecom equipment company Avaya, so there could be some synergistic bundling of offerings.

Skype has developed mobile applications for Apple’s (AAPL - Analyst Report) iphones and Research In Motion’s (RIMM - Analyst Report) Blackberry handsets. The company also agreed to embed its services on some Nokia (NOK - Analyst Report) handset models. These areas could also be further developed.

eBay said that the sale was on track to be completed in the fourth quarter. However, there could be a hitch in the contract as the buyers would have to agree to the terms of settlement with Joltid. Moreover, any new technology that could have a negative impact on Skype’s business could also put an end to it.

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