End to a Fight Over Skype May Be Near
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SAN FRANCISCO — The bitter battle over the future of the Internet calling service Skype appears to be nearing an end.
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A resolution of the litigation surrounding the service, which is owned by eBay, could be announced as soon as this week, according to several people who have been briefed on the situation. The parties “sound optimistic that there’s a settlement,” said one of these people, who spoke on condition of anonymity because talks were at a delicate stage and could still collapse.
The proposed settlement is between a consortium of private equity investors, who successfully bid for Skype in September, and the original founders of Skype, who have filed several lawsuits in an effort to scuttle the consortium’s $1.9 billion deal to buy a majority of Skype from eBay.
Skype allows its 520 million registered users to make free calls to one another using their PCs or mobile devices that run Skype software. It charges its users comparatively low rates to call regular phones, but that money adds up. Skype brought in $185 million for eBay in the last quarter and was the fastest-growing part of its business.
The legal settlement, according to two people briefed on its outlines, would restructure the group that is buying Skype. Niklas Zennstrom and Janus Friis, who created Skype and sold it to eBay in 2005, would take a significant stake in the new Skype.
Index Ventures, a London-based venture capital firm whose partner, Michelangelo Volpi, was at the center of litigation over the Skype sale, is most likely withdrawing from the deal.
It was not clear how much of the new Skype Mr. Zennstrom and Mr. Friis would own, although they would receive at least one seat on the new company’s board. Crucial to the proposed deal is that they drop their various lawsuits against eBay and the other Skype buyers.
Lewis M. Phelps, a spokesman for the founders, said they had no comment on “rumors about the existing litigation.” Alan Marks, an eBay spokesman, declined to comment.
The settlement would bring a close to a legal battle that started in March, when Mr. Zennstrom and Mr. Friis sued eBay in a British court.
The pair said that eBay had violated the terms of a contract that allowed Skype to use a core technology, held by a company they own called Joltid, that provides the service’s underlying peer-to-peer infrastructure.
The move was primarily tactical. Behind the scenes, Mr. Zennstrom and Mr. Friis were organizing their own bid to buy Skype back from eBay. As part of their proposal, they offered hundreds of millions of their own money and the Joltid intellectual property, and were joined by a group of private equity firms.
But eBay did not accept their bid, partly because of animosity between the Skype founders and eBay management, according to a person involved in the proposal.
Then in September, eBay said it was selling 65 percent of Skype to a rival group of investors led by Silver Lake Partners, a private equity firm in Silicon Valley.
That group had been organized by Index Ventures. Mr. Volpi, a new partner there, had worked for the Skype founders at Joost, an unsuccessful online video start-up that also used the Joltid technology. Mr. Volpi asserted that he had the expertise and contacts to lead the effort to redevelop Skype so that it no longer relied on the Joltid code.
A wide-ranging legal imbroglio ensued. Mr. Zennstrom and Mr. Friis sued eBay and the consortium of buyers on the grounds of violating the Joltid copyright, this time in United States District Court in Northern California. They asserted that damages could accrue at $75 million a day.
Joost and Joltid also sued Mr. Volpi and the other members of the buyout group in federal court in Delaware. That lawsuit claimed that Mr. Volpi had improperly used confidential information about Skype’s software to assemble the buyout team and make a successful bid.
The lawsuit sought to prevent Mr. Volpi and Index from sharing that knowledge, making it difficult for them to continue as participants in the group.
According to a person with knowledge of its legal strategy, eBay was prepared to argue that it was Mr. Zennstrom himself who, as chief executive of Skype until late 2007, closely intertwined the Skype and Joltid code and made it difficult for eBay to make changes to Skype without violating its Joltid contract.
But even the act of fighting the lawsuit seemed likely to damage the reputations of everyone involved. For example, in some of the e-mail messages entered into evidence and made public, between Mr. Volpi and Danny Rimer, a fellow partner at Index Ventures, Mr. Volpi frankly assessed the strengths and weaknesses of other members of the deal-making team.
Cisco Systems took another step to expand its computer hardware businesses on Tuesday by forming a broad partnership with EMC, a maker of storage equipment and software.
The two companies announced on Tuesday that they had created a joint venture called Acadia that would work to sell their data center equipment to businesses. The new venture will focus on designing and building systems that rely on virtualization technology, which can help customers create a more flexible technology infrastructure and lower their capital spending costs. For Cisco, the arrangement should aid the company’s efforts to sell its nascent line of computer servers and increase competition against the likes of Hewlett-Packard, I.B.M. and Dell.
Cisco has long been the dominant supplier of networking equipment like switches and routers for corporate data centers. But, earlier this year, the company expanded into the computer server market as well, placing it in direct competition with traditional partners like H.P. and I.B.M.
According to analysts, the partnership with EMC should lend some credibility and reach to Cisco’s server aspirations.
"You will see us joined at the hip," said John T. Chambers, the chief executive of Cisco, during a telephone interview.
The two companies, along with VMware, a majority-owned subsidiary of EMC, will create pre-built bundles of hardware and software. These packages will include networking and server gear from Cisco, storage and security software from EMC and VMware’s virtualization software, which lets customers run numerous applications on individual servers.
The bundles are reminiscent of the mainframe era, when customers would buy large, unified systems that handled most of their computing needs. After years of disaggregation because of the rise of PCs and servers, equipment suppliers have recently been pushing customers back toward a model in which customers spend larger parts of their technology budgets with one company.
H.P. and I.B.M. have relied on their own products and services organizations to build these bundles for customers. Now, Cisco and EMC will work together through Acadia to create similar offerings.
VMware and Intel have also made minority investments in Acadia, said Joseph M. Tucci, the chief executive of EMC.
Cisco and EMC said they expected customers to build “private clouds” with their technology. This phrase refers to the increasingly popular cloud-computing model, where individual users tap into online services delivered via a data center rather than running software directly on their PCs. In a private cloud, a company uses its own data center to create these types of services for employees and to divide computing resources among different divisions.
Along with servers, Cisco has been looking to expand into a wide variety of new businesses as it tries to increase the company’s revenue. In the last month, Cisco has made a pair of $3 billion acquisition bids — one for the videoconferencing specialist Tandberg and one for Starent, a telecommunications equipment maker.
The Tandberg tender offer has met resistance from some shareholders, who are pressing for a higher price. Cisco said Monday, “We strongly believe our offer is a very good price for Tandberg shareholders.”
Cisco shares were down almost 2 percent in midday trading, and EMC shares were off about 1 percent.
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partner / 04.11.2009
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half the article is about the ebay/skype/joltid lawsuit
the other is about a cisco joint venture.
good article.