Wednesday, 15 April 2009 03:59

eBay to spin off Skype with a 2010 IPO

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Skype has never sat comfortably under the eBay umbrella, and now the online auction giant has decided to spin off the popular P2P voice service. An IPO is planned for 2010.

When eBay purchased Skype from its founders in 2005, the motivation for the deal wasn't obvious. There was some talk of making it easier for buyers and sellers to communicate, but that could have been achieved without an acquisition.

Now eBay has finally admitted that Skype wasn't a good fit.

John Donahoe, eBay president and CEO, said "it's clear that Skype has limited synergies with eBay and PayPal. We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential."

The plan is to make an initial public offering in the first half of 2010.

"This will give Skype the focus and resources required to continue its growth and effectively compete in online voice and video communications," explained Donahoe.

"In addition, separating Skype will allow eBay to focus entirely on our two core growth engine - e-commerce and online payments - and deliver long-term value to our stockholders."

It's not that Skype has been performing badly. Revenue rose 44 percent to $US551 million in 2008, and registered user numbers were up 47 percent to 405 million.

So why is eBay now looking to divest Skype? Please read on.


The timing could be due to eBay adopting a 'stick to your knitting' strategy to deal with the economic downturn (the company just agreed to sell StumbleUpon back to its founders), but there are also suspicions that it may be related to the cancellation of a technology licence between Joltid and eBay.

Joldid has alleged that eBay's Skype operation is in breach of the licence. This appears to be related to Skype being required by a US court to disclose the code in a patent case.

Skype has asked the English High Court to declare that its use of the code and the disclosure are lawful and that the notices of breach and termination by Joltid are invalid.

"Skype is confident of its legal position," eBay officials said in a US SEC filing.

If the High Court does not rule in eBay's favour, it's hard to see what it has to offer in the planned IPO, as it seems the technology is at the core of Skype's operation.

While Skype is perhaps best known for free user-to-user calls, its revenue comes mainly from calls to or from conventional or mobile phones. Skype is estimated to deliver as much as eight percent of international call minutes, making it the world's largest international voice carrier.

There was recent speculation that Skype's founders Niklas Zennstrom and Janus Friis were preparing to buy back the company for substantially less than they received from eBay.

Skype recently released an iPhone client and has announced plans for a BlackBerry version.

The company is also beta testing a service that allows organisations with SIP-based telephony systems to connect to the Skype network for inbound and outbound calls.

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Stephen Withers

Stephen Withers is one of Australia¹s most experienced IT journalists, having begun his career in the days of 8-bit 'microcomputers'. He covers the gamut from gadgets to enterprise systems. In previous lives he has been an academic, a systems programmer, an IT support manager, and an online services manager. Stephen holds an honours degree in Management Sciences and a PhD in Industrial and Business Studies.

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