Silver Lake Partners Wins $2.9 Billion Skype Payday

Don't be surprised to hear the sound of clinking cocktail glasses at the Silicon Valley offices of Silver Lake Partners. The private equity firm has emerged as the clear victor following Microsoft's (MSFT) $8.5 billion purchase of Skype on May 9.

About 18 months ago, Silver Lake led a group of investors who acquired a 70 percent stake in Skype for $1.9 billion from EBay (EBAY). At the time, it looked like the investors might be stuck with an underachieving Internet brand. Skype rose to prominence in the mid-2000s as one of the first VOIP providers, which route phone calls over the Internet, and was bought by EBay in 2005 for $2.6 billion. Its name had become synonymous with Web-calling, but the company was slow to push out new products, failed to make much money off its immense popularity, and got bogged down in an intellectual property fight between EBay and its founders. Despite these flaws, Egon Durban, a Silver Lake managing director, saw enough promise in Skype to plunk down $940 million, the firm's largest equity investment in its 12-year history.