Oct. 1 (Bloomberg) -- EBay Inc., the world's largest Internet auctioneer, will take a charge of more than $1.4 billion, most of it to write down the value of its Skype Internet telephone division. It also said the unit's co- founder, Niklas Zennstrom, quit.

EBay, acknowledging that Skype hasn't performed as expected since acquiring it for $2.6 billion in October 2005, said in a statement today that it will write down the value of Skype by $900 million in the third quarter, as well as take an additional charge of $533 million to pay former shareholders under a provision of the takeover agreement.

Some analysts criticized the company for paying too much for the then-unprofitable Luxembourg-based startup, which allows people to make calls over the Internet. EBay Chief Executive Officer Meg Whitman sought the purchase to improve communications and quicken transactions on the auction site. Skype's second-quarter revenue was $90 million, 4.9 percent of EBay's total.

``Management, to their credit, the last several quarters has been very up front saying it wasn't meeting their expectations,'' said Steve Weinstein, an analyst with Pacific Crest Securities in Portland, Oregon, who rates the shares ``outperform.'' ``The direction it was going wasn't creating the value we wanted to see.''

Zennstrom, who co-founded Skype in 2003, stepped down and will become executive chairman of the unit's board, San Jose, California-based EBay said. Michael van Swaaij, EBay's lead strategy officer, was named Skype's interim chief.

EBay rose 64 cents, or 1.6 percent, to $39.66 at 4 p.m. in Nasdaq Stock Market composite trading. The shares have gained 32 percent this year.

Shareholder Payments

``It has not performed as well as we would have hoped in the short term,'' EBay spokesman Hani Durzy said in an interview.

Skype was profitable the first half of the year, he said.

EBay said it paid 375 million euros ($533 million) to settle obligations with certain Skype shareholders. The agreement, made when EBay bought Skype, called for payments of as much as $1.7 billion to shareholders based on user, revenue and gross profit goals.

EBay said it hired Russell Reynolds Associates to help find Zennstrom's replacement.

Skype had more than 196 million registered users through July.

To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net

Last Updated: October 1, 2007 16:04 EDT