By Geoffrey A. Fowler OF THE WALL STREET JOURNAL EBay Inc. (EBAY) announced a legal settlement with the co-founders of Skype, allowing a planned $2 billion deal to sell a majority share in the Internet communications company to a group of investors to proceed. Skype's founders Niklas Zennstrom and Janus Friis will join the consortium by taking a 14% stake in the company, and will also join the company's board. In exchange, they will make an undisclosed cash investment and withdraw lawsuits their companies Joltid Ltd. and Joost NV have with eBay and members of the consortium. (This story and related background material will be available on The Wall Street Journal Web site, WSJ.com). Zennstrom and Friis will also contribute Joltid software that is critical to the operation of Skype. They had been involved in an intellectual property dispute with eBay over that software, which they held onto when they initially sold Skype to eBay in 2005 for about $2.6 billion in cash and stock. "Skype will be well positioned to move forward under new owners with ownership and control over its core technology," said eBay chief executive John Donahoe in a statement. "We look forward to closing the deal and focusing on growing our core e-commerce and payments businesses." The new deal could finally bring an end to an unhappy tech marriage between e-commerce giant eBay and Skype that had only gotten more complicated since eBay announced plans to sell the company. Zennstrom and Friis, who had made an earlier unsuccessful bid to buy back Skype, had been involved in an intellectual property lawsuit with eBay since the spring. After eBay announced plans to spin off the company in September, their companies filed suits claiming copyright theft by members of the buyout coalition, including Index Ventures employee Mike Volpi, who once also worked for Joost, another company owned by the founders. In the new terms announced Friday, Index Ventures will leave the consortium of investors. "The deal terms changed for Index such that it no longer matches our investment criteria and thus we have decided not to participate in the transaction," said Index partner Danny Rimer in a statement. Under the new terms, private-equity firm Silver Lake, venture-capital firm Andreessen Horowitz and the Canada Pension Plan Investment Board will together own 56% of Skype, while eBay will retain 30%. The next challenge will be for the parties, which had engaged sometimes in personal attacks in legal proceedings, to agree on how to run Skype. "There is fighting, and then there is negotiation," said Andreessen Horowitz partner Marc Andreesen. "We believe it is as a plus to have founders involved. They now have a complete alignment of interest." A spokesman said Zennstrom and Friis were not available for comment.
