In 2002, Niklas Zennstrom and Janus Friis launched Skype, a free Internet phone service. In September, they sold it--for a sum that still has Wall Street and Silicon Valley reeling.
The number seems so large, so impossibly huge, that you almost have to look at it twice. But that's no typo. In September, Niklas Zennstrom and Janus Friis sold Skype Technologies, their Luxembourg-based Internet phone service, to eBay for $2.6 billion.
Not bad for a company that is scarcely three years old, had revenue of some $60 million in 2005, and isn't expected to break even until the end of 2006. But if many in Silicon Valley and on Wall Street remain shocked by the size of the deal, Zennstrom, a 39-year-old Swede, and Friis, a 29-year-old Dane, appear to be taking things in stride. The world's fastest-growing Internet phone service, Skype offers downloadable software that allows users to talk to one another over the Internet through their personal computers. As long as you're calling within the Skype network, it's free--whether you're ringing Paris or Peoria. "We expected it would revolutionize the way people communicate," Zennstrom says.
He wasn't the only one to feel that way. Skype started receiving entreaties from potential acquirers just months after it was funded. By 2005, the company was talking to Yahoo, Google, Microsoft, and News Corp., all of which were impressed by the fact that the start-up had shot from zero to 54 million users in less than three years and was adding new ones at a rate of 150,000 a day. Now that eBay owns Skype, the company plans to use it to make buying and selling easier for its 157 million users, especially those involved in big-ticket transactions that require more detailed conversations.
Zennstrom and Friis are certainly no strangers to shaking things up. The duo's last venture was the controversial music-downloading service Kazaa. By the time they sold it to Sharman Networks for an undisclosed amount in January 2002, the recording industry was in an uproar, and the two remain defendants in a copyright-infringement suit filed by the Recording Industry Association of America.
Zennstrom and Friis left Kazaa when they sold it. But they're staying put at Skype. EBay has promised the pair--Zennstrom runs business affairs while Friis attends to the technology--full autonomy, and they have barely stopped to catch their breath. They're already at work on new projects, including a video-phone system. There's also incentive for them to stay--the deal could be worth as much as $4.1 billion if certain targets are reached by the end of 2009. Says Zennstrom: "We're focused on being the world's largest communications business." Who knows? As voice-over-Internet grows, it could happen. If it does, it might make $2.6 billion look cheap.