Slow of me I know, but news has only just filtered through of corporate skulduggery at the highest level in the wake of Microsoft’s $8.5bn takeover of internet telco Skype.
In short order, most of Skype’s top brass – including head of the mobile unit (and current chairman of the Marketing Group of Great Britain) Russ Shaw and chief marketing officer Doug Bewsher – have been fired. Altogether, 5 out of 8 of the top team, which includes vice presidents David Gurle, Chris Dean and Don Albert, are out of the door. Head of human resources Anne Gillespie has also gone.
It would be tempting to see the clunking fist of Microsoft heavy Steve Ballmer in all of this. Not guilty, in fact. The corporate scything fest seems to have resulted from a grubby conspiracy by Skype private equity owner Silver Lake and its newly appointed Skype CEO Tony Bates to do the departing executives out of their rightful financial dues.
Let me explain. In 2009 California-based Silver Lake acquired a 70% stake in Skype from eBay for $2bn. At the time, Skype seemed a great idea badly in need of a commercial rationale, which is why eBay got rid of it at a loss. Late last year, Silver Lake installed Bates, who had worked at Cisco Systems, as CEO with a brief to turn Skype into a more engineering-led enterprise.
Little did we know the full scope of that corporate engineering brief. It is difficult to ascertain how long Microsoft had been showing a serious interest in buying Skype – and what Bates and Silver Lake knew and didn’t know about that interest and for how long. Suffice to say, when Ballmer came up with the $8.5bn offer, it represented a staggering overvaluation of Skype’s market worth by conventional market metrics. To give an idea of the financials, a recent Skype filing revealed revenues of $406m for the first 6 months of 2010, ending 30 June, and a net income of $13m. Scarcely the bedrock for an $8.5bn valuation.
The Microsoft offer appeared to come out of the blue. What the company’s senior executives had actually been banking on was an imminent IPO, which would have raised a mere $1bn. Many of them had joined the company on a relatively low salary with stock packages geared to that IPO.
By firing them all before the Microsoft deal was finalised, Silver Lake and Bates have effectively diddled the departing executives out of a much bigger compensation package. My understanding is that once the deal is completed, any compensation has to be based on the actual $8.5bn purchase price.
More on this to come, I’m sure.