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Ebay bids not-so-fond farewell to Skype

By Stuart Turton

Posted on 15 Apr 2009 at 08:30

Ebay will spin off Skype in 2010, after acknowledging that it has little in common with the business it bought back in 2006.

The decision follows a year-long review which found that there was little synergy between Ebay's core auction business or payment service PayPal.

"Skype is a great standalone business with strong fundamentals and accelerating momentum," says Ebay's chief executive, John Donahoe. "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 maximising its potential."

Ebay will initiate a public offering of Skype shares by the first half of 2010, with the company thought to be looking to rake in around $2 billion for the deal.

That will still be considerably beneath the $2.6 billion Ebay paid in 2005. The company has since admitted it overpaid for Skype, and was forced to write down its value by $1.4 billion in 2007.

The IPO is surprising considering the interest of Skype co-founders Niklas Zennstrom and Janus Friis in buying back the company, though early reports suggested the two parties came to the table with widely differing valuations of Skype's worth.

Zennstrom and Friis were thought to be trying to raise $1 billion from private investors, and some analysts have suggested that pursuing a private sale may yet be the wisest cause.

"The very first thing that I have to say is market conditions currently would not support an IPO of Skype," says Commresearch analyst Gregory Lundberg. "2010 will be equally questionable unless the business completely changes course with the launch of the Blackberry and iPhone applications."

The Skype IPO follows yesterday's announcement that Ebay was selling web discovery service, StumbleUpon, back to its original owners.

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