Skype - Employee Presentation

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Skype - Employee Presentation Powered By Docstoc
					                              Equity Incentive Plan


December 2009

                                                      1 Slide
  2009 © Skype. Commercially confidential
Disclaimer
No representations or warranties (expressed or implied) in relation to Skype (the “Company”) are made in this
presentation, or any other written or oral statement provided. Only those representations and warranties which are
made in any definitive agreement, which will not contain any representations, warranties or undertakings as to this
presentation, shall have any legal effect.

Neither the issue of this presentation nor any part of its contents constitutes an offer to sell or invitation to purchase
any securities of the Company or to enter into any financing transaction with the Company or any persons holding
securities of the Company and no information set out in this presentation or referred to in other written or oral
information is intended to form the basis of any contract of sale, investment decision or any decision to purchase any
securities in, or advance any finance to, it.

This presentation (together with any further information) is supplied to you on the condition that it is kept strictly
confidential and shall not be passed on to any other person or reproduced in whole or part and shall be returned along
with any other copies at any time at the request of Skype.

This presentation should not be considered as a recommendation to acquire any securities of the Company or to enter
into any financing transaction with the Company or any person holding securities of the Company. Recipients are
recommended to seek their own financial and other advice and should rely solely on their own judgment, review and
analysis in evaluation the Company, its business and affairs.

THIS PRESENTATION IS CONFIDENTIAL AND IT, OR ANY INFORMATION CONTAINED HEREIN, MAY NOT BE
PUBLISHED, REPRODUCED OR REDISTRIBUTED, DIRECTLY OR INDIRECTLY, TO ANY OTHER PARTIES. BY RECEIVING
THE CONFIDENTIAL INFORMATION YOU ARE DEEMED TO AGREE THAT YOU WILL KEEP THE CONFIDENTIAL
INFORMATION CONTAINED HEREIN AND YOU ACKNOWLEDGE THAT IRREPARABLE HARM MAY BE CAUSED BY YOUR
FAILURE TO DO SO.



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Program Overview
 The objectives of the Equity Incentive Program (EIP) are:
     – Enable employees to share meaningfully in the future capital appreciation of Skype
     – Provide incentives for employees to contribute to operational and financial performance
     – Align interests of employees and shareholders


 The EIP will allow employees to participate in the value creation from the transaction:
     – New option pool of equity at closing, including a reserve for new hires
     – Option grants will include time vested options and performance options vesting upon
       achievement of investor return thresholds


 Individual grants are being awarded on a discretionary basis reflecting seniority, critical
  business impact, skill set, performance and future potential




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Skype EIP vs. Public Company RSU Awards
              Skype EIP Awards                    Public Company RSU Awards

  Significantly higher potential upside    Generally lower potential upside


  Illiquid security in the short term      Liquid security once vested


  Value of award directly tied to Skype    Subsidiary growth trajectory often has
   performance                               limited impact, particularly if subsidiary
                                             is considered non-core
  Direct alignment of interests with
   investor group




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Investment Thesis
Skype holds a leading position in a very large market and has a strong growth outlook


               Attractive Business Model                                 Strong Growth Outlook


                 $1.7T global telephony market, $75B                  One of the fastest growing Internet
Large Global      International Long Distance (“ILD”)                   companies in history
   Market         calling segment                                      Increasing activity among connected users
 Opportunity     Strong consumer demand for feature                    ad strong user growth momentum
                  rich services (e.g. video)
                                                                       Opportunity to increase growth in core
                 VoIP leader with 6 year track record                  business
Established      Widespread adoption, accounting for                     – Broad appeal leaves ample growth
  Position        more than 8% of all international call                     runway; addressable market is
                  volume                                    Strong           growing, due to increasing broadband
                                                            Growth           penetration and communications
                 Free/ low-price offering                 Momentum          market transition from hardware to
                 Network effect from 100M connected
  Highly                                                                     software
                  users
Competitive
                 Low customer acquisition cost                           – Significant room to increase revenue
 Offering                                                                   per customer and to improve
                 Strong brand
                                                                            customer retention
                                                                       Opportunity to grow revenue from new
 Attractive      Low capital intensity
                                                                        businesses including SME, Mobile and
 Cash Flow       Prepayment business model
                                                                        Advertising
   Profile       Attractive cash tax rate
                                                                                                                    5
2009 Achievements
2009 has been a year of extraordinary achievement as we positioned the company for future growth



  Maintained rapid growth trajectory (operationally and financially)


  Scaled organization in terms of headcount and capabilities


  Completed sale transaction to investor consortium


  Re-established Skype as a standalone company


  Settled Joltid lawsuit and removed litigation overhand




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Illustrative EIP Award Value
Scenario analysis:
       Downside Case:              3.9x current strike price
       Base Case:                  5.5x current strike price
       Upside Case:                8x current strike price


Example: what this means for an employee:
       Employee grant (example):             [100] options
       Strike Price (same for everyone):     $255 per share

       Value in Year 5:                       Stock     Less strike    Option
                                              Value       price        Value

       Downside Case:     $255 x 3.9 x 100 = $99,840 - $25,500 =       $73,950
       Base Case:         $255 x 5.5 x 100 = $140,800 - $25,500 =     $114,750
       Upside Case:       $255 x 8.0 x 100 = $201,600 – $25,500 =     $178,500
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Key Terms
  EIP grants will include time and performance vesting options
     – Time options vest over 5 years (20% after one year, monthly thereafter)
     – Performance options vest based on “multiple of money” (“MoM”) return achieved by new
       equity investors (excluding eBay)

  Exercise Price:   Same as SLP paid for Skype equity ($255 per share)

  “Good Leaver”: someone who gets fired without “Cause”

       Gets the fair-market value of their currently vested options

  “Bad Leaver”: someone who resigns, or is fired for “Cause”

       Skype buys back their options at the lower of fair-market value or strike price

       This provision lapses post-IPO

  Monthly vesting after 1-year, not annual vesting (like the eBay RSUs)
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Next Steps
  Individual EIP stock option grant letters to be distributed before year end 2009 together with EIP
   summary Q&A

  [Follow up EIP information sessions with management and HR team to be scheduled in early 2010]

  Detailed EIP agreements to be finalized and as soon as practicable in early 2010




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