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.
