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Article

Whatever Was Meg Thinking

When she bought Skype four years ago for $3.1 billion, that lavish price didn't buy her the code that actually runs the thing

When former eBay CEO Meg Whitman - who now wants to be elected governor of California next year - bought Skype four years ago for $3.1 billion, that lavish price didn't buy her the code that actually runs the thing.

Fancy that.

As amazing as it sounds eBay actually licenses the all-important P2P widgetry, called Global Index, from Joltid Ltd, a Swedish company started by the smooth-talking Kazaa hustlers, Niklas Zennstrom and Janus Friis, who sold Skype to eBay and are re-using the software as the engine underneath their new venture into TV.

Well, of course, as everyone knows the Skype-eBay marriage hasn't been a happy one. eBay wrote off $1.7 billion of the Skype purchase price and - after failing to find a buyer that would pay its estimated $1.7 billion asking price - it's contemplating divorce by way of an IPO next year.

Only trouble is Joltid pulled the Global Index license after Skype took Joltid to court in England in March looking for declaratory relief because of a flap over alleged source code modification and/or disclosure - the later ordered by a US court in connection with some patent cases - that Joltid contends breached their contract.

Joltid counterclaimed and the trial is set for June 2010 - right about the time Skype might try to go public.

eBay said in an SEC filing the other day that Skype is now trying to develop software to replace Global Index just in case things don't go well for it in court. However, it admits it may not be able to pull it off and whether it works or not it's going to be a very expensive undertaking.

And if the substitute software doesn't work, and it can't negotiate a pre-trial settlement or loses the right to use the Joltid software, well, according to the 10-Q "the continued operation of Skype's business as currently conducted would likely not be possible."

Zennstrom and Friis may be gambling that happens so they can buy Skype back on the cheap. They were reportedly trying to put a consortium together a few months ago.

With 480 million registered users Skype is said to control 8% of international calls now and did $550 million last year. Russian oligarchs last week also branded it a threat to Russian telecom businesses and national security since it's hard to spy on Skype calls.

Calls over Skype are free unless you're calling an old-fashioned land line.

Meanwhile, there's a bridge in San Francisco Ms Whitman might be interested in.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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