Bloomberg News

Skype Fires Executives, Avoiding Payouts After Microsoft Buyout

June 30, 2011

June 20 (Bloomberg) -- Skype Technologies SA, the Internet- calling service being bought by Microsoft Corp., is firing senior executives before the deal closes, a move that reduces the value of their payout, according to three people familiar with the matter.

Vice Presidents David Gurle, Christopher Dean, Russ Shaw and Don Albert were dismissed from the Luxembourg-based company, said the people, who requested anonymity because the departures aren’t public. Chief Marketing Officer Doug Bewsher and Anne Gillespie, head of human resources, were also fired. Executives Ramu Sunkara and Allyson Campa, from the 2011 Qik purchase, were also let go.

The timing of the dismissals means stock options will be worth less than if the executives stayed until the closing of the $8.5 billion deal, the people said. When a company gets bought, compensation is often tied to the purchase price, said Neil Sims, a managing director at Boyden, a search firm.

“All is good if you’re staying with that transition team or you’re packaged out,” said Sims, who is based in San Francisco. “But if you’re eliminated unceremoniously, without a package and without some negotiation, you could certainly lose unvested options.”

Silver Lake, based in Menlo Park, California, led a $2 billion buyout of a 70 percent stake in Skype from EBay Inc. in 2009. The private equity firm and several Skype directors have actively voiced their opinions on who should be fired, two of the people said.

Jenny Farrelly, a spokeswoman for Silver Lake, and Frank Shaw, a spokesman for Microsoft, declined to comment.

‘Management Changes’

“As part of a recent internal shift, Skype has made some management changes,” said Brian O’Shaughnessy, a Skype spokesman.

Silver Lake hired Chief Executive Officer Tony Bates from Cisco Systems Inc. to replace Josh Silverman last year. Bates has put his stamp on Skype by trying to restore its engineering- centric roots, churning out more features at a faster pace for its 170 million active users. He also streamlined a global management structure that was decentralized and fraught with territorial disputes and slow bureaucracy. The company was headed for an initial public offering before Microsoft agreed to buy it last month.

FTC Approval

Microsoft announced the Skype acquisition on May 10 and plans to connect it to Outlook e-mail, Xbox game console, Windows mobile phones and corporate-phone software. Skype offers voice and video calling over the Internet and is primarily used by consumers. The U.S. Federal Trade Commission said it approved the deal, according to a June 17 statement.

Gurle joined Skype in January 2010, overseeing its efforts to persuade corporations to adopt Skype. Dean served under Silverman as chief strategy officer, helping forge a partnership with Facebook Inc. Albert oversaw advertising endeavors including a partnership with The Oprah Winfrey Show.

Six of the departures were previously reported by Skype Journal, a blog that covers the company.

Skype was founded in 2003 by Niklas Zennstrom and Janus Friis. The founders sold the company for $2.6 billion in 2005 to San Jose, California-based EBay.

--Editors: Lisa Rapaport, Tom Giles

To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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