Ebay to divorce itself from Skype

San Jose (CA) – Ebay conceded that acquiring Skype back in September of 2005 was a mistake. While the online auction giant had big plans with the VoIP pioneer, the “synergies” are “limited”. Ebay now prepares Skype for an IPO in the first half of 2010 and it appears that taking the company public may only be a measure of damage control for Ebay.
“Skype is a great stand-alone business with strong fundamentals and accelerating momentum,” said Ebay’s president and CEO, John Donahoe, in a prepared statement “But 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.”

Ebay acquired Skype in September 2005 for $2.6 billion, but has taken charges of $936 million on the company since then, which decreased the valuation of Skype in Ebay’s books to about $1.7 billion. In 2008, Skype generated revenues of $551 million, up 44% from 2007, and segment margins of approximately 21%. Registered users reached 405 million by the end of 2008, up 47% from 2007. Ebay expects Skype to become Skype to become a billion-dollar company in 2010.  

When separated from Ebay, Skype will have the “focus and resources required to continue its growth and effectively compete in online voice and video communications,” Ebay said. In turn, Ebay can “focus entirely on our two core growth engines—e-commerce and online payments,” the company stated.

The decision to separate Skype is based on a timeline outlined by Donahoe when he became Ebay’s CEO in April 2008. At the time, the company said it would spend a year evaluating Skype and its potential synergies within the Ebay portfolio before making any decisions about Skype’s future.