Skype Execs Purged On Eve of MS Takeover

jfruhlinger writes "You might think that the executive team that engineered a lucrative buyout for their company would be rewarded. But eight execs from Skype instead found themselves fired just before their company was formally taken over by Microsoft. It appears that this move isn't meddling from Redmond; rather, the private equity firm that owns a 70 percent stake in Skype wanted to cut back on the payout to company execs that would normally accompany this kind of transaction."

Comments

Ah, but I wanted to blame Microsoft

[elrous0]

It appears that this move isn't meddling from Redmond

There must be SOME way I can blame this on evil Microsoft. Were the fired execs open source, by any chance?

Re:Ah, but I wanted to blame Microsoft

[captain_sweatpants]

You must not have noticed the reference to them being executives.

Re:Ah, but I wanted to blame Microsoft

[s73v3r]

So some other overpaid freeloading bastards (The VCs) fired some other overpaid, freeloading bastards (The Execs)?

Re:Ah, but I wanted to blame Microsoft

[toppavak]

Yes, but it would have been possible for them to make a lot more money out of the process if they were fired afterwards. Typically stock paid to execs have to vest over a period for ex. every year 20% of your stock vests over 5 years. If the execs were not fully vested, the acquisition event would have triggered an instant vest clause and they could have cashed out on their entire package. If they were fired before the acquisition, any stock that had not yet vested would simply be lost, reducing the total amount of stock Skype had issued and increasing the value of the stock held by the equity firms. They were stabbed in the back by their own financiers- not an uncommon occurrence. It serves you well to vette the VCs you work with every bit as much as they're going to vette you.

The invisible hand of captialism

[Pope]

Always seems to be carrying a very sharp sword.

Re:The invisible hand of captialism

[s73v3r]

Yeah, this argument is retarded, as everyone else in the sector enjoys the same protections on their software. Basically, it says, "If I could compete with Microsoft by selling their OS, Microsoft Windows, then they wouldn't be a monopoly." Basically saying that, if you could just clone their software and compete with them by selling the same thing, yet you without all the R&D costs that Microsoft put into it, then there'd be "competition".

This also completely ignores the fact that Microsoft forced a bunch of OEMs to pay them royalties on all computers, even those without Windows, in blatant violation of all anti-trust laws and anti-competition laws. Face it, Microsoft became a monopoly of their own doing, not by being propped up by "government."

Re:The invisible hand of captialism

[Dorkmaster Flek]

Because physical property is naturally scarce. If I'm using a plot of land, you can't use the same plot of land. Hence, we have a conflict that physical property law resolves. Intellectual property has no built-in scarcity. In fact, IP laws actually create artificial scarcity where none exists.

Re:The invisible hand of captialism

[The Great Pretender]

"It appears that this move isn't meddling from Redmond; rather, the private equity firm that owns a 70 percent stake in Skype wanted to cut back on the payout to company execs that would normally accompany this kind of transaction."

I'll let you into a secret, they knew, probably got paid well and Microsoft were in on it.

1) As an exec in company like this you come in with a contract that has all departure routes covered, outside being fired for cause. It's standard practice and if you didn't require it, you wouldn't be doing that job. So yes, they were made whole and that means a lot of cash, probably a chunk of equity prior to the sale.

2) Microsoft negotiated the options for the buy out and that means assessing and pruning the management at Skype, before the sale. Skype didn't just futz with the company on the eve of the sale. Removing the folks MS don't want before the sale takes the focus off of MS for clearing out who it doesn't want. It would be a negotiated point.

3) My guess is that these execs are M&A (Mergers and Acquisition) specialists. They were likely specifically bought in to engineer something like this. So they've done their job and they'll move on to the next.

You don't sell/buy something for $8.5 billion and not talk about everything. Trust me, everybody knew way before now who was staying, who was leaving and how much money they were going to make.

Fired?

[lymond01]

The spokeswoman declined to say whether the eight executives were laid off or resigned.

Someone knows something not in the linked article?

Re:Fired?

[eln]

At the executive level, "fired", "resigned", and "laid off" all mean the same thing. At any rate, even if they didn't have golden parachutes as part of their employment contracts (and they're idiots if they didn't), I'm sure they have plenty of stock and stock options to dry their tears with.

when the victims of corporate psychopaths

[circletimessquare]

are other corporate psychopaths, it's hard to feel sympathy

Re:when the victims of corporate psychopaths

[DontBlameCanada]

IMHO, the only thing worse than execs of of a corp getting paid off at the expense of employees during a take over, is when a nameless venture cap org does.

We don't know the whole story, but if venture cap nuked execs (that might possibly have been instrumental in making the company successful) to increase their own take, that is *WORSE*.

Re:when the victims of corporate psychopaths

[twidarkling]

Why? At least VCs actually do something with the cash. Invest it in other places to make more money. C*Os tend to simply sit in a company and get rich. Sometimes they move to other companies that are already established and get rich. Very rarely do they take that money and knowledge and make something new to make money with.

Re:when the victims of corporate psychopaths

[DontBlameCanada]

C*O's of start ups or young companies typically aren't fat cats who siphon cash while contributing zero. A small corp will quickly die off as all jobs, from ground floor peons to the CEO are important.

C*Os of established corps can indeed be fat cats. Established revenue streams, customers, large enough assert hoards to give a company viability via inertia for more than 4 quarters. Inattention and self-serving proclamations that don't result in immediate corporate implosion, can thrive in that environment.

VC's exist to generate return on investment for their major partners. Some act as angels, but most promise x% return on investment to their patrons. If the VC is short on promise #s, they will take the short term personal gain over the long term health of the entity they are selling.

Corporate Sleeze

[DaMattster]

That is a really slimy thing to do. However, usually the little guy gets hurt in mergers and aquisitions so I, in some ways, am happy to have the upper echelon get a taste of it. I think these executives that got affected might consider the smaller guys in their future roles, perish the thought.

Interesting...

[fuzzyfuzzyfungus]

Ordinarily, even pathetic, abject failure verging on negligence isn't enough to get the People Who Matter sacked. These private equity guys must have some epic level suits on staff, if they are able to rightsize executives as though they were mere peons...

Shed no tears for them.

[140Mandak262Jamuna]

These guys are big fish, swimming with the sharks. For example Gurle joined in Jan 2010. Just 18 months with the company. All the fired ones seem to be the MBA types who move in just to dress the company up for sale or IPO. Not the founders and early grunts who toil in garages and warehouses during the very early days living on pizza, sleeping in the office, desperately churning out code on a shoe string budget, not knowing if they can make pay roll next month.

These suits ate little fish in their time. They got eaten by bigger fish. They will again start eating little fish once again. Just stay out of their jaws, if you can.

Don't feel bad, dear managers

[Opportunist]

You know, every time a takeover happens some people get fired.

I am delighted to see that for a change it happens to you.

Reading into it?

[DaScribbler]

This submission, and the article referenced to, read entirely differently.

Where exactly does it say they were fired?

mergers are statistically bad for everyone

[smoothnorman]

A wise old CEO wheezed unto me: "A merger is a risk to everyone except one of the two CEOs - to everyone else it is a danger". Mergers reduce competition, so the market loses; mergers cost stockholders, at least in the short-run; mergers are engines of redundancy so it's a threat to all the employees. The only possible virtual gain is an investors' promise of less competition in the marketplace. Almost everyone loses. So the next time you read: "Massive-corp to buy out Macro-corp!" try not to cheer for the two original owners who get their one-time lottery prize, but instead pause in lament for the majority and progress in general.

Whole team?

[siriuskase]

What matter is whether they were the whole team, half the team. or deadwood statues of the team.

It's hard for outsiders to recognize the deadwood, and it's hard for insiders to fire their friends. Sometimes takeover time is a good time for insiders to let the outsiders clean house. Is this what happened or was the whole team let go?? This is something that an outside observer can figure just by visiting the parking lot.

Who cares if the were laid off. They are out in either case. Unless they turned into contractors.

A new kind of evil?

[AliasMarlowe]

Now we blame everything on Apple..... and sometimes google.

Not everything, just the moderate amount of evil that isn't actually Microsoft's fault. Most of it can be fairly blamed on Apple, but this one kind of falls through the cracks. It's evil, but can't really be blamed on Microsoft or Apple or Adobe or Oracle (the usual gang of malefactors), Google haters are utterly stumped, and it's not even patent or DRM style evil.