Will eBay sell Skype?

Bambi Francisco Roizen · January 26, 2009 · Short URL: https://vator.tv/n/679

Speculation is mounting that the online phone service may be on the block soon

 When eBay purchased Skype for a whopping $4.1 billion, in stock, cash and earnouts, it was a very controversial move. Critics believe the online marketplace giant overspent on an asset that wasn't a good fit, and proponents thought it was a good bet to lower customer-acquisition costs. 

It turns out Skype may be a wash, if it sells for roughly $2.6 billion - the same amount eBay ended up buying it for back in 2005. It very well could, given that it is still a fast-growing asset, generating some $600 million in revenue a year. Skypeout minutes reached 2.6 billion, up 61% annually, driven by growth in Asia.

Today, eBay is considering selling this still fast-growing asset. Skype has 405 million users (double since eBay bought it four years ago), and generated $145 million in revenue in the last quarter, up 26% from a year-ago period. 

Here's what's the Times is saying:

Industry insiders believe that eBay signalled its intent last week after John Donahue, its chief executive, described Skype as a “great stand-alone business”. This has led to suggestions that eBay would find it relatively easy to part with Skype, if a substantial bid was made.

Mr Donahue was speaking to analysts about eBay's disappointing fourth-quarter profits, which had been hit by slowing consumer spending.

When asked what was being done by eBay to add shareholder value in Skype, Mr Donahue admitted that “the synergies between Skype and the other parts of our portfolio are minimal. We're going to continue to run and operate the business. It's not a distraction currently. And at such time when we have further announcements on that, we'll let you know.”

The comments have reignited rumours that eBay will consider offers for Skype. Larry Witt, an analyst with MorningStar, the investment researchers, said: “If someone's willing to pay the right price, I don't think [eBay] would have a problem selling it.

“They will have their own internal projections on how much it's worth, but I think they made it clear it's not a core part of their strategy going forward.”

Ebay bought Skype, which allows users to make telephone calls over the internet, in 2005 for $2.6 billion but has admitted since then that it hugely overpaid for the business. The software was developed by the entrepreneurs Niklas Zennström, Janus Friis, and a team of software developers based in Tallinn, Estonia. Industry insiders suggested that potential buyers for Skype might include Google, as it would fit well with the search engine's similar Google Talk feature, as well as American telecoms companies such as AT&T or Verizon, both of which have strong businesses in landlines and mobile telephone networks.

Jack Murphy, an analyst for William Blair, a Chicago-based investment bank, said: “It's important that eBay has opened the door to a buyer by talking about Skype as a stand-alone business. It would be best for eBay to get whatever cash they could for it and focus on their struggling core marketplace business.”

(Image source: voipcentral)


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Bambi Francisco Roizen

Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.

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