By Sinead Carew and Eric Auchard

NEW YORK/SAN FRANCISCO (Reuters) - EBay Inc said on Monday it would cut as much as $1.2 billion off the $4.3 billion potential price it agreed to pay for Web-based phone-calling service Skype two years ago.

The writedown on the value of the deal came as eBay said Skype co-founders Niklas Zennstrom and Janus Friis had resigned as executives, and marks a tacit admission of lackluster returns from Skype since eBay acquired it two years ago.

EBay said in a U.S. regulatory filing on Monday it would pay Zennstrom, Friis and other Skype shareholders 375 million euros ($530 million) and take a charge of $1.4 billion against eBay's third-quarter results, due out later this month.

"I think this is a testament that the Skype franchise is not worth as much as eBay originally thought," said Wall Street analyst Youssef Squali of brokerage Jeffries & Co.

Shares of eBay hit an 18-month closing high of $39.66, up 1.6 percent on Monday, reflecting the lower price the online auction leader is paying for Skype and the greater flexibility eBay may now have to put Skype on a new course, analysts said.

The stock is up more than 20 percent since late August in anticipation of strong quarterly results.

"If you take Skype out of the equation, the rest of the eBay business seems to be doing great again," Pacific Crest Securities analyst Steve Weinstein said. "EBay management has found ways to re-accelerate the core (auctions) market. Lots of its businesses are doing extremely well."

EBay's deal to acquire Skype was controversial with investors from the start. A key justification of the deal was eBay's hope to stoke growth in its core auction business, which has slowed in recent years, and by call-billing payment tie-ins between Skype and eBay's PayPal online payments service.

The returns to eBay on the Skype deal, the largest Internet transaction since the technology stock downturn of 2000, contrast sharply with the $580 million Rupert Murdoch paid to acquire MySpace two months ahead of the eBay-Skype deal.

For while Skype has failed to live up to expectations, generating $90 million in revenue in the most recent quarter ended in June, Murdoch recently said he would be surprised if market-leading social network MySpace failed to deliver $1 billion over the course of the fiscal year ending June 2008.

MOVING ON

In September 2005, eBay agreed to pay $2.6 billion for Skype and make further payments over three years of up to $1.7 billion based on Skype meeting targets for growth in users, revenue and profit targets.

EBay said on Monday it may pay Skype shareholders a further 138.4 million euros, or about $195.2 million, but only if eBay sells 50 percent or more of Skype by the end of March 2008.

Zennstrom wanted to spend more time on new projects and would become Skype's nonexecutive chairman, eBay spokesman Hani Durzy said.

Zennstrom founded online video startup Joost.com together with Friis after the Skype sale. The two are well-known Swedish entrepreneurs and active investors in European Web startups.

Skype reported its second quarterly profit in a row in the second quarter, with 220 million registered users. But eBay CEO Meg Whitman told investors she was not happy with the results.

EBay said it added 160 million Skype users in two years. That was likely the basis for Zennstrom's pay-out, Pacific Crest's Weinstein said. "(Zennstrom's) receiving part of what he could have ... What that's telling you is that they're on track for some metrics but not all," he said.

EBay, based in San Jose, California, said its chief strategy officer, Michael van Swaaij, would act as Skype CEO until it finds a permanent successor to Zennstrom.
© Copyright 2007 Reuters.

Related:
eBay bought Skype on 2006.