EBay Hangs Up On Skype, Offers IPO
When eBay acquired Skype four years ago for $2.6 billion, many questioned the strategy of how the marriage would produce any viable offspring. The doubting Thomases proved to be right and eBay, its subsidiary PayPal, and Skype have never been able to mesh their businesses.
The decision to snip Skype came after a year of evaluation by John Donahoe, who took the helm as president and CEO at eBay in April 2008, according to the companies.
"Skype is a great stand-alone business," said Donahoe, in a statement. "But it's clear that Skype has limited synergies with eBay and PayPal. We believe operating Skype as a stand-alone, publicly traded company is the best path for maximizing its potential."
The IPO plan comes after The New York Times reported that Skype founders Niklas Zennstrom and Janus Friis were looking to raise $1 billion from equity investors to buy back the company.
Skype has done well financially, and generated $551 million in revenue in 2008, an increase of 44 percent from 2007. Although eBay doesn't want Skype, it remains bullish on the company and recently said it expects that Skype will top $1 billion in revenue in 2011.
eBay hasn't set a timetable for the IPO, saying only that it will depend on market conditions. The lousy state of the market and the IPO give many Wall Street watchers pause.
"The very first thing that I have to say is market conditions currently would not support an IPO of Skype in our opinion," CommSearch analyst Greg Lundquist told Reuters. "2010 will be equally questionable unless the business completely changes course with the launch of the BlackBerry and iPhone applications. Strategically, something else might happen altogether. Skype is probably more supportable as a strategic partner. Ebay was not necessarily that company."