Tom In Rumored Divorce With Skype TOM集团或失去Skype在华代理权
Five or 6 years can be an eternity in cyberspace, which is clearly the lesson that former Internet high-flyer Tom Group (HKEx: 2383) is learning as it moves one step closer to irrelevance with word that its long-time partnership with Skype is on the verge of breaking up. That divorce would represent the end of one of its last remaining tie-ups with major western media firms that helped propel the company to fame nearly a decade ago.
The Chinese headlines are buzzing today with word of the pending break-up, which would see the pair part ways after a partnership that never really realized its potential. (English article; Chinese article) The reports are a bit unclear about the actual situation, mostly because Tom isn’t confirming anything; but they say the 2 sides’ original agreement ended last year, and that Tom has laid off some employees as talks continue on a potential renewal.
Tom is calling the layoffs part of routine operations, but industry sources are saying that Microsoft, which purchases Skype last year from previous owner eBay (Nasdaq: EBAY), wants to run Skype by itself and integrate the service into its own products rather than working through partners like Tom.
Tom, an Internet company backed by Hong Kong billionaire Li Ka-shing, was a regular name in the headlines as recently as 6 years ago,when it looked like it could become China’s next Internet sensation following its partnership with US media giant Time Warner (NYSE: TWX) to operate a TV station in China. It followed that partnership several years later with the Skype tie-up and another deal to jointly operate an online auction site in China with eBay.
Those tie-ups came as the company’s own online operations also thrived on the strength of its own services that tied in with cellphone text messaging. But the company seemed to hit multiple obstacles all around the same time starting around 2007, when it privatized its separately listed China unit, Tom Online, as its fortunes started to fade. Its Time-Warner tie-up was also a major disappointment, and I suspect the companies have quietly disbanded the project although neither has ever publicly confirmed that.
Meantime, the eBay tie-up was also a major disappointment. An exclusivity clause in that partnership quietly ended at the end of last year, and my sources tell me that eBay is now looking for other partners to form a new e-commerce venture in China, which it was previously prevented from doing under the former exclusivity clause.
This pending divorce with Skype, if it happens, could perhaps mark the beginning of the end for Tom, as it fades further and further into obscurity. The company’s shares have hovered around the HK$0.60 for much of the last 5 years, and don’t attract much trading volume these days. If this Skype divorce really goes ahead, which looks likely, the company will lose one of its last major points of interest for investors, and I could easily see a privatization bid in the next 1-2 years.
Bottom line: A pending divorce between Tom Group and Skype would mark the latest setback in Tom’s slow fall into irrelevance, with a potential privatization bid in the next 1-2 years.
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