How did I call the Skype writedown?
A few weeks ago, I began writing to members of SNS that eBay was on the way down, and Amazon on the way up. We put this into our Ahead of the Curve investor’s letter, as well as into the Strategic News Service.
For me, this was a real reversal: for the life of these two companies, I’ve been saying just the opposite: that eBay had a beautiful business model, and that Amazon was a shareholder disaster in the making.
That was then.
On October 1st eBay started admitting the Skype problem, and about a week later the near-term size of the screwup became clear: a $1.4B writedown on a company they had just paid $2.6B to own.
How did I call the Skype writedown so closely? The answer is simple: I didn’t. Although I could have reasoned that Skype was an overpay, based on what I think of its service, this was only part of my reason for turning against the company. The real reason: CEO Meg Whitman had failed in her attempts to get projected levels of traction overseas, and, to make her numbers, had levied additional fees against her base.
If those were the kinds of decisions going on at eBay, what else coujld be wrong? Well, Skype, and no doubt more that we’ve yet to hear of.
Sometimes making a good call doesn’t require every detail, but rather a good 30k-foot view, while everyone else (i.e., almost all of Wall St.) is looking at the detail of your latest financial report – exactly what was going on two weeks ago.