Marbridge Daily

July 12, 2012

Rumor: Tom May Lose Skype China Operating Rights

Tencent Tech, 7/12/12

An industry source says Chinese-language media conglomerate Tom Group (2383.HK) was unable to renew its contract with Skype last year, and is now operating Skype in China beyond the end of its previous agreement. Following relatively "dismal" performance for Skype in China, Microsoft intends to integrate Skype thoroughly into its other services, following its acquisition of the company, meaning that Tom could lose China operator rights for Skype.

When Tencent Tech called Wang Zhiyong, Tom Online's employee in charge of Skype operations, Wang said he was away on business, adding that as Microsoft keeps a tight rein on discussions, he was unable to comment. Li Xiuli, Tom Online's marketing director for online value-added services, said she had not been informed about the matter.

Other industry sources say that Tom began being unable to produce authorization for Skype last year when working with handset makers to pre-install the application.

When speaking to several former Tom employees who recently left the company, Tencent Tech was told that the company has begun "transformative" layoffs of employees working on Skype, gaming, and the original online literature site Huangjian Shumeng, among other services. Layoffs have affected more than 100 people so far, with Skype employees accounting for such a large proportion of laid-off individuals that technical staff are reportedly almost all gone.

Li Xiuli said that the recent layoffs were "part of normal efficiency considerations," adding that "roughly 10% of employees are eliminated every year for bringing up the rear."

A source close to figures in Tom Group said that there had been disagreement about Skype within senior management. Tom CEO Yang Guomeng was in favor of dispensing with Skype altogether, while executive SVP Feng Jueli advocated keeping the service.

Editor's Note: Sina Tech reports Tom as confirming that talks to renew its contract for Skype are still ongoing. The company says that the layoffs reported are part of normal restructuring and will not affect more than roughly 5% of employees.

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