Cleaning Out the Closets at Skype

So late last week, the FTC granted early termination to Microsoft and Skype for their announced deal.  Early termination of the HSR waiting period means that Microsoft and Skype can move towards closing that deal.  Now, comes the news from Bloomberg that Skype has fired a number of executives prior to closing: 

Skype Technologies SA, the Internet-calling service being bought by Microsoft Corp. (MSFT), is firing senior executives before the deal closes, a move that reduces the value of their payout, according to three people familiar with the matter.

The reasons for the letting go this group of 8 high level Skype execs prior to closing aren't known, but the Skype Journal blog reinforces what is hinted at in the Bloomberg report - that the firings were done in order to reduce the number of stock options that are vested at closing and thus raises the payout to venture investors.

Now, I have no way of knowing if increasing the payout for investors is in fact true or if the execs that were let go didn't get an equivalent cash payout on their way out the door.  My guess is that they did, but I don't know.  If on the other hand it's true, then it's pretty cheesy.  

The prospect of getting a large cash payout from valuable options after an IPO or a when unvested options are automatically vested coincident with sale is a huge part of the incentive package that keeps talented people working at start-ups.  If it's true, and I guess everyone in the Valley will know the truth soon enough, then it means that executives with unvested options will be spending more time than one might like ensuring their positions in the event of a sale rather than risk getting let go just before their big payout.  

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