The deal reverses eBay’s controversial 2005 acquisition of the Luxembourg-based Skype for $2.6 billion. Many analysts have questioned the deal as Skype’s services were never fully integrated into eBay’s online auction system.
A consortium of investors led by Silver Lake Partners, a Silicon Valley-based private equity group, bought 65 percent stake in Skype for $1.9 billion in cash and $125 million in a note. The deal valued Skype at roughly $2.75 billion.
eBay intended to use Skype as a platform for auction sellers and buyers to communicate over the Internet, but was forced to write down the value of Skype after the service flopped. Nonetheless, Skype remains today the world’s most popular Voice over IP (VoIP) application with over 480 million subscribers.
Since then, Skype has been dogged by a legal dispute with its European founders over voice technology. EBay had hoped to spin off Skype in 2010.
“We’ve acted decisively on a deal that delivers a high valuation, gives us significant cash up front and lets us retain a meaningful minority stake with talented partners,“ said eBay President and CEO John Donahoe in a statement. ”Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments businesses.”
Columnist Om Malik from GigaOm opposes the deal, saying that eBay did not get proper value from this sale.
First they paid top dollar for Skype back in 2005, making billionaires out of Niklas Zennstrom and Janus Friis. And, now instead of waiting for an opportune time to go public, eBay management is selling low, at a time when the only buyers are bargain hunters,” Malik said.
Malik feels that eBay shareholders would have received better value next year in an IPO, assuming Skype continues to add subscribers under its new leadership.
“With the calling service on track to bring in $600 million in revenues in 2009 (though we’re not sure how much profit it makes for eBay), the company is a likely candidate for a public offering when the IPO window opens again, perhaps in 2010,” Malik added.
Rosetta Stone Inc. and CDC Software are examples of recent IPOs in the technology industry that have been successful.
Donahoe, on the end hand, feels that right now is a good time to sell Skype given the cash received up front. “This deal achieves our goal of delivering short- and long-term value to eBay and its stockholders, without the possible delays and market risk of an IPO,” Donahoe said.
“Selling Skype now at this great valuation, while retaining an equity stake, makes sense for the company. And it allows us to focus all of our energies on the opportunities in front of PayPal and eBay.”
The company expects the deal to close during the fourth quarter.
