Founders Seek to Buy Skype Back From EBay
By BRAD STONE
New York Times
April 11, 2009
SAN FRANCISCO — The European duo who created Skype and sold it to eBay for billions may have another trick up their sleeve: buying it back.
Niklas Zennstrom and Janus Friis, the original founders of Skype, have approached several private equity firms and are pooling their own substantial resources to make a bid for the Internet calling service, say several people familiar with their plans.
The pair sold Skype to eBay in 2005 for $2.6 billion, and later received bonus payouts that boosted the final price to $3.1 billion. Since then, Mr. Zennstrom, a native of Sweden, and Mr. Friis, of Denmark, have created the venture capital firm Atomico and backed the online video service Joost, both based in London.
Skype now has more than 405 million registered users, up from 53 million when eBay bought it, and the service had $145 million in revenues in the fourth quarter of 2008. Calls are free between Skype users, and rates are a few pennies a minute for international calls to non-Skype users; the low cost has helped the company gain 8 percent of the world’s international calling minutes, according to Telegeography, a market research firm.
Skype also currently has one of the most popular applications for Apple’s iPhone, and has said it is developing software for the BlackBerry, due in May.
However, eBay has admitted that Skype has few synergies with its core e-commerce and payments businesses, and John Donahoe, eBay’s chief executive, has repeatedly signaled his willingness to sell Skype for the right price.
Mr. Zennstrom and Mr. Friis did not respond to requests for comment, and it is unclear at this point whether the pair is actively engaged in negotiations with eBay. But one person familiar with their thinking says they are trying to raise about $1 billion in equity from private investors, and were discussing one scenario in which eBay itself would put up the rest of the financing in the form of a seller’s note to complete a deal for Skype worth more than $2 billion.
An eBay spokesman said the company did not comment on rumors.
Analysts believe eBay is looking for a price of at least $1.7 billion, the value of Skype on its balance sheet after the company wrote off a portion of the acquisition in 2007.
While there has been market speculation recently that eBay would sell Skype to another large corporation, it’s unclear whether anyone else is interested. Google was a losing bidder for Skype in 2005, but has since developed its own Internet-based calling service, Google Voice.
One key factor that might scare off other potential buyers is a brewing intellectual property dispute between eBay and the Skype founders. In a regulatory filing April 1, eBay disclosed that Joltid, a company founded by Mr. Zennstrom and Mr. Friis, had terminated eBay’s license to Joltid’s peer-to-peer technologies, which are at the heart of Skype’s calling service.
EBay said in the filing that it was asking a British court to rule that it was not in breach of the agreement, but the matter is unlikely to be resolved by the end of the year. Without a settlement or other resolution, the dispute is likely to dissuade anyone other than Mr. Zennstrom and Mr. Friis from considering an acquisition of Skype.
Selling Skype would solve a number of problems for eBay, including generating some much-needed cash for its U.S. operations. EBay had $3.19 billion in cash at the end of last year, but $2.8 billion of that money is overseas and would be subject to repatriation taxes if the company were to invest it in its ailing U.S. e-commerce marketplace, according to analysts.
Copyright 2009 The New York Times Company
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