Last May, Microsoft announced that it plans to buy Skype for $8.5 billion, considerably more than the $2.6 billion that eBay paid for the company in October 2005. Before the deal is finalized, however, Skype is firing a number of top executives in an attempt to reduce the value of their payout.
Top brass who have been let go include four vice presidents, the Head of Human Resources, and the Chief Marketing Officer, as well as two other senior executives.
The move is intended to reduce compensation costs for executives who would likely be let go following the takeover. Compensation is usually linked to the purchase price of the company, in this case $8.5 billion. Firing the executives is intended to reduce the cost of the stock options. “If you’re eliminated unceremoniously, without a package and without some negotiation, you could certainly lose unvested options,” says Neil Sims of the executive search firm Boyden.
The acquisition means that Skype will not be releasing its long-anticipated IPO, which could also have raised the company’s value. Despite protests, the FTC announced that it approved the acquisition on June 17.