eBay explores Plan B for Skype, or is it Plan C?
EBay Plans Public Offering for Skype
By BRAD STONE
New York Times
April 15, 2009
SAN FRANCISCO — EBay announced plans on Tuesday to spin off Skype, its Internet calling division, in an initial public offering aimed at the first half of 2010.
EBay has been looking to sell Skype since the beginning of the year. But it could not find a bidder willing to pay a high enough price, despite interest from Skype’s founders, Niklas Zennstrom and Janus Friis, who led a group of private equity firms in making an offer for the rapidly growing calling service.
“Skype is a great stand-alone business with strong fundamentals and accelerating momentum,” said John Donahoe, eBay’s chief executive. He noted, however, that Skype was not a good fit with eBay’s two core businesses, its auction site and its PayPal online payments service.
“We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential,” Mr. Donahoe said.
EBay outbid Google and Yahoo in buying Skype in 2005 for $2.6 billion, on top of performance incentives that later lifted the final price to $3.1 billion. In 2007, Meg Whitman, then eBay’s chief executive, acknowledged that the company grossly overpaid by writing off $1.4 billion of the purchase price.
One problem for eBay in selling Skype is an escalating intellectual property dispute between eBay and the Skype founders. Joltid, a company founded by Mr. Zennstrom and Mr. Friis, retained ownership of the peer-to-peer technology used in Skype and licensed it back to eBay. Recently, Joltid said that eBay had breached that agreement, and eBay has asked a British court to intercede.
The matter is unlikely to be resolved by the end of the year, which could be dissuading potential buyers of Skype. It is also one reason eBay is eyeing an offering for Skype nearly a year from now. The company said market conditions would determine the specific timing of the offering.
“We will settle that before we do an I.P.O., and we are confident in our legal position on that litigation,” said Alan Marks, an eBay spokesman.
Analysts who follow eBay have expected it to sell Skype outright, and were surprised by the announcement. They applauded eBay’s efforts to spin it off, although they noted that the public markets have not been very receptive to initial offerings. There have been no I.P.O.s of venture-backed companies in the last two quarters, the first time such a drought has occurred, according to the National Venture Capital Association.
“EBay is communicating that they expect capital market conditions to be much better next year,” said Sandeep Aggarwal, an Internet research analyst at Collins Stewart.
In 2008, Skype generated revenue of $551 million from 405 million users. The company recently announced that it expects Skype to top $1 billion in revenue in 2011. Skype’s new application for the iPhone was downloaded two million times in its first week, and has become one of the most popular third-party applications on the device.
“You have a large, fast-growing, highly profitable enterprise. It probably would represent the most compelling technology story since VMware or Google,” said Paul Bard, head of research at Renaissance Capital, which estimates a Skype offering could raise as much as $5 billion, depending on what kind of ownership stake eBay retains. “It’s a growing biz, highly profitable and it’s a leader in its market.”
Copyright 2009 The New York Times Company
Story link |
