eBay also announced that it has paid approximately $530 million (in Europe) to settle all of its future obligations under the earn-out agreement signed with certain Skype shareholders when eBay acquired Skype in 2005.  eBay expects that the approximately $530 million payment, together with an additional amount of approximately $900 million, will be taken as an impairment charge to be recorded as part of its Q3 financial results.

This likely won’t impact non-GAAP earnings per share by anything drastic but will create a change to analysts’ cash flow expectations and to GAAP net income expectations for the quarter.  Interestingly enough, eBay lists over $6.9 Billion in Goodwill of its entire $14.36 Billion assets.  The good news is that it only listed $2.8 Billion in total liabilities at the end of last quarter (before these charges of course), so the online auction king can quite easily ride this one out.

• We have covered its "BUY IT NOW" patent fight;
• We noted the Cramer call for it to merge with Yahoo!;
• and even noted its Skype selling at Wal-Mart.

Jon C. Ogg
October 1, 2007

As of June 30, Vonage had $343.5 million in cash.  But some of that cash may be tied up because of the Verizon (NYSE:VZ) case, although we’ll have to double check on that.  The same could be said for some of the pending shareholder suits since this did nothing but free fall after the 2006 IPO.

The good news is that Vonage doesn’t carry any "Goodwill" on its balance sheet.  That’s good, because they’d have to change it to "Ill-Will."

Shares dropped over 7% to $1.81 before the stock was halted.  These royalty payments are being tallied up and likely aren’t yet finished.  This company needs to conserve cash in a serious way.  Otherwise its position as a going concern will become at issue.  At one point this case was rumored to be settled, but that obviously isn’t the case.

Dr. Pangloss might be happy that this gets one more case behind it.  But the company as a business is getting closer to being in a real bind.

Past articles relevant to today’s news:

• Vonage Files Its Annual Report; Risks, Legal Proceedings, & All
• Vonage Gets Some Hope (VG, CLWR)
• Vonage’s "Patent Workaround"

Jon C. Ogg
September 25, 2007