
Skype Fires Executives, Avoiding Payouts - diogenescynic
http://www.bloomberg.com/news/2011-06-19/skype-fires-executives-avoiding-payouts-after-microsoft-buyout-closes.html
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Luyt
_"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."_

This is phase #1 of Microsoft's usual "embrace, extend, extinguish" strategy.
Right now they embrace Skype and build it into some of their products.

The next step will be to enhance the Skype protocol with extra Outlook and
Windows Phone options; these protocols will be proprietary, patented and
certainly not published.

The final step will be to discontinue the Skype clients for OSX and Linux
('because their increasingly incompatibility with rich features the Windows
platform offers Skype users'), update the protocol even further so that
current Skype clients will stop functioning, and gradually remove the 'Skype'
name and logo from their products, and eventually, from history.

The idea is to disadvantage any competitors, and to make Skype users switch to
Windows or a Windows phone.

~~~
gaius
FUD, FUD, FUD and that's easy to prove: Hotmail on the Mac works just fine.

~~~
gvnonor
Are you being sarcastic?

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pg
The later the stage investor, the less they need to worry about their
reputation with anyone except their LPs.

~~~
dschobel
Yeah but christ, is anyone going to want to take money from them after this?
This is cut-throat by any standard...

~~~
astrec
PE firms like this focus more on leveraged buyout than growth capital - the
people taking their money are generally looking for an exit.

------
ary
Stay classy Skype.

I _wish_ there was an alternative that matched Skype's previous good qualities
(or better). The obfuscation of the OS X Skype client UI, plus the fact that
they're now owned by Microsoft has cast a shadow on what used to be a great
service (to me at least). Surely there is room in the market for a serious
competitor.

~~~
Corrado
Do any of these strike your fancy?

* <http://www.oovoo.com/home.aspx>

* <http://tinychat.com/>

* <http://www.vbuzzer.com/conferencing/web_conferencing.php>

* <http://www.goober.com/>

* <http://www.voxox.com/>

~~~
kidmen
For webcaming, I've personally found ooVoo to have better quality than Skype.

~~~
MortenK
I tried ooVoo recently as my significant other had problems getting Skype
working. I must say I can't see it as a competitor to Skype. The UI is
borderline unusable due to all the flashing ads. What's worse is my contact
list of one got deleted, and it was impossible to re-add my GF. That was on
day 2. A few days later, she was back on my contact list. I don't trust it,
and it's a pain to use due to all the ads and the general UI.

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brudgers
To keep this in perspective, Gurle, Dean and Gillespie were not long time
employees from the startup days (all less than three years), Sunkara and Campa
came on board this year through acquisition, and Brewsher, as head of
marketing, was probably redundant in light of Microsoft's purchase.

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djcapelis
Good for them. If you're going to be cutthroat dicks, be consistent.

I hope their good employees take note.

~~~
r00fus
Reduction of equity stake after negotiated compensation just reeks of pure
theft. So what are good employees supposed to do?

Doubtless the ones who did not get diluted were the big money while the
workers get shafted (as usual). Kleptocracy at it's finest.

~~~
djcapelis
> So what are good employees supposed to do?

Leave, if there's any justice in the world.

This is how the market works. The reason you don't screw your employees like
this is not just because you're a nice person, but because it costs you money
in the long term.

~~~
chernevik
Alas, market mechanisms aren't such great protectors here. They work best with
large populations of similar events, where "average" behaviors can signal
expectations and volatilities can be estimated on a fairly stable basis.
Endgames offer the unethical opportunities to reap excess rewards without
market penalties.

Hopefully, there will be enough information to know just how screwed these
people are (or aren't, I've seen gossip that several were late-comers) and the
VC / executive players involved. It's possible that these decisions make some
sense, but it sure looks bad at first glance.

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beambot
What can a (startup) employee do to prevent these sort of situations from
occurring after a liquidity event? In particular, what sort of terms should be
in your hiring agreement -- eg. double trigger acceleration?

~~~
mrkurt
This sounds like it was explicitly to get around the trigger clauses in the
contract. They likely had acceleration for change of control, and fired people
before the "event" that would have triggered that acceleration.

~~~
shimon
Don't these contracts typically require termination _with cause_ in order to
interrupt vesting?

Not that that's a perfect solution, but it should at least make these more
blatant acts a bit easier to pursue in court.

~~~
bediger
I bet that the "with cause" part would be pretty easy to find. Every company
I've worked for that had official policies wrote them so vaguely and all
encompassing that every single employee was in violation. Some of the "don't
introduce 3rd party software to the network" policies, when read strictly,
make every single developer who writes a small automation script a violator of
the policy.

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meterplech
Just when I (and everyone else) was saying how horrible this is, I was shocked
to find out the Google did something very similar to a Director of Operations
named Brian Reid. They fired him 9 days before the IPO- leaving him with
119,000 unvested options at $.30 strike price.
<http://en.wikipedia.org/wiki/Brian_Reid_(computer_scientist)>

~~~
euroclydon
If they're not vested, they're not vested. Maybe developers should strive for
their delivery schedule to tightly coincide with their vesting schedule.

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nhangen
I hate to get spiritual here, but this is a major dose of bad karma, and I
won't be surprised when shit hits the fan and something happens to these
companies during, or after the deal.

In the meantime, I'm looking for a way to get off of Skype. I wish Google
would spend more time improving Google Voice and Google Chat. I wonder if
Apple has plans to turn Facetime into a Skype alternative?

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adamfeldman
Is this typical and accepted behavior in a transaction like this?

~~~
kenjackson
Pretty common, rarely as blatant.

Most commonly what you'll see is employees/founders who had vested but left
the company early get screwed.

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ebaysucks
Amazing that this kind of behavior by Skype/Msft wasn't calculated in the
contract at the time of signing it.

~~~
kenjackson
This is pretty standard. If your options haven't vested and you're let go
there usually isn't much you can do. I doubt MS has anything to do with it,
except the fact that they probably didn't express any particular concern
regarding the deal if these employees were let go.

~~~
teej
There's plenty they could have done before the contract was signed. They could
have easily pushed for double trigger acceleration in their own contracts to
prevent this.

~~~
prostoalex
Company's officers fiduciary duty is to protect interests of shareholders.
Complicating contracts with the purpose of transferring that wealth from
shareholders to executives could be construed as violation of that duty.

~~~
cynicalkane
"Transferring wealth" isn't an abandonment of fiduciary duty, it's exactly
what you do when you _hire people and pay them_. Nor is there anything wrong
with negotiating contracts describing the details.

~~~
prostoalex
Good point. Just saying that unless you're a founder or a majority
shareholder, you have little power in terms of blocking the deal from going
through.

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dstein
And who can blame them, it's just more of the 8 billion for the rest of them.

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jarrett
A lot of people have commented that this type of stuff is standard. Maybe
that's true.

But if I considered my stock options to be an important, must-have part of my
compensation package, I'd demand contractual protections. Double triggers have
been suggested; one could envision other safeguards as well. One way or
another, I'd make sure that my options were safe in the event of my arbitrary
termination.

If I couldn't negotiate that, I'd base my negotiations on the assumption that
the worst-case scenario would happen. In other words, I'd discount the value
of my stock options accordingly when deciding whether the offered compensation
package was adequate.

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bugsy
I'm sure this won't result in any costly lawsuits.</skepticism>

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daemin
I'm wondering if this could be some mad-men-esque deal where the people fired
really want to do their own thing? Get fired on purpose so that they're free
to do their own company in the same space.

Probably not but that's something that came to mind for me.

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drivingmenuts
Whoever designed the OS X Skype UI should have been first against the wall.

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temp10238
Technically this isn't Skype anymore. Skype management needed a cue from
Microsoft.

~~~
jordan0day
It is still Skype (well, the private equity firm that owns Skype). The msft
deal hasn't gone through yet.

~~~
corin_
While it is their call, and they will want to maximise profit from the sale,
there's no chance that MS didn't sign off on this - think how pissed they
could be. "We're buying your company and you just fired the executives that we
wanted to keep running it?"

I can only assume that it was decided as part of the sale negotiations.
Whether it was Microsoft saying "we want to bring in a new team at the top" or
the owners saying "we want to maximise profit" first, who knows.

~~~
pyre
There's always a chance that it wasn't part of the deal, but that Microsoft
won't care. If they feel that they are buying the tech, and not the team, then
they might not object to this.

~~~
corin_
The fact that they might not care doesn't change the fact that the sellers are
_extremely_ unlikely not to check if they care before firing everyone.

