eBay puts Skype up for sale.

Last night eBay, the internet auction site, announced plans to spin off Skype the internet calls business in an initial public offering some time next year. 

Four years after paying $3.1 billion for Skype, eBay has finally admitted what every other industry insider realised years ago that it there really weren’t any valuable synergies to be gleamed from adding Skype to its core auction business.

The decision to sell the company opens the door for any private equity buyers to move in on Skype although it seems unlikely that anyone is already in the frame..  However, it leaves open the possibility that the creators of Skype, the billionaire Scandinavians, Janus Friis and Niklas Zennstrom, could repurchase the company since their other venture Joost is hardly creating much of a stir. It is reported that they are working with the private equity firm, Warburg Pincus,  to make a bid for Skype and eBay’s move may be interpreted as putting pressure on them to put up or shut up!

John Donahoe, the chief executive of eBay, said: “Skype is a great stand-alone business with strong fundamentals and accelerating momentum. But it is clear that Skype has limited synergies with eBay. We believe operating Skype as a stand-alone publicly traded company is the best path for maximising its potential.”

EBay's plans were cheered by investors, who sent the shares up 56 cents, or 3.9 per cent in after-hours trading on Wall Street. They saw Skype as an unnecessary distraction that was tying up capital.  In 2007 eBay, which is being advised by Goldman Sachs, conceded it had massively overpaid for the calls company when it took a writedown of $1.4 billion. Last year Skype generated revenues of $551 million, up 44 per cent from 2007. Its user base - now at 405 million - leapt 47 per cent from 2007.

If Friis and Zennstrom do buy back Skype, eBay is unlikely to receive anything close to what they paid for the company back in 2005, but they will be able to focus on growing the eBay business as the recession comes to an end and those “green shoots” of recovery start to take root.

Skype and Nokia are bonding – will it lead to marriage?

Latest news from the Mobile World Congress in Barcelona is that Skype and Nokia have announced a partnership to provide free and low-cost calling for Nokia's N-series of Smartphones, starting with the N97 later this year.  Skype’s software will be integrated into the phone's address book, providing presence detection when other Skype contacts are online, as well as enabling use of the Skype instant messaging client.  Significantly, the Skype service will be available both over Wi-Fi and 3G high-speed networks, so users won't need to be near a wireless hotspot to make Skype voice calls. Users will be able to communicate with Skype-to-Skype voice calls, as well as make mobile and landline Skype calls at their low VoIP prices.  Sony Ericsson also has a Skype on its Xperia  X1 device, running Windows Mobile 6.1 and Skype has a mobile ‘lite’ version running in beta on LG, Motorola, Nokia, Samsung and Sony Ericsson phones.

How will this go down with the operators I wonder?  I suspect this will not be viewed as such great news by the operators, who may view this as an attempt by Skype and Nokia to eat their lunch.  In future I expect that the major operators will be less than happy to offer subsidised VoIP capable Nokia phones to their users.  This story clearly has legs and given that eBay have indicated that Skype is no longer compatible with their long term strategy and have effectively hoisted a large “For Sale” sign over them, this move just might make Skype a good fit with either a hungry operator or an aggressive handset manufacturer.