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Tech Check
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Call it the worst kept secret in tech land: What would eBay do with its non-performing asset Skype, the company it spent billions of dollars to acquire just a few short years ago, but could never successfully blend into its culture or its business.
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Paul Sakuma / AP |
For months, speculation has mounted that eBay [EBAY
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] would dump it, spin it off or do something else with it. Just yesterday, in fact, there was a story that Skype's original founders, Niklas Zennstrom and Janus Friis had put together a top shelf group of investors including KKR, Warburg Pincus, Providence and Elevation Partners to re-acquire Skype from eBay. Sounded good, until …
eBay decides to spin off Skype on its own, announcing plans today for a Skype initial public offering to be completed some time in 2010. No price range, no anticipated proceeds, but an IPO nonetheless. That has to be welcome news to eBay investors who probably scratched their heads raw when Meg Whitman announced this deal in 2005, with eBay ponying up $2.6 billion for the deal. I mean, PayPal made lots of sense from the outset. This one simply didn't. And there Skype languished, at least as far as an asset is concerned to the broader eBay strategy.
That doesn't mean that Skype hasn't been growing, and exceptionally well. eBay says today that the internet phone calling service did about $544 million in revenue in 2008, up about 46 percent from 2007. Its registered users jumped to 405 million globally, up 47 percent from 2008. eBay also projects Skype exceeding $1 billion in revenue by 2011, so the torrid growth pace will continue. A recent deal with Apple [AAPL
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] and the iPhone and an upcoming app on the Blackberry will certainly help the company achieve that goal.
eBay says the timing of the IPO will depend on market conditions. But the news certainly thwarts Skype's founders' attempts at a buy-out, and that has to hurt this group of investors in a pretty big way, particularly Elevation Partners which has essentially pinned its entire future on the success of struggling Palm and the company's new Pre smart phone coming from Sprint some time in June, even though no release date or price point has been announced, and it'll be going up against increasingly stiff competition from the likes of Apple and the iPhone and new Blackberrys from Research in Motion [RIMM
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Meantime, eBay may finally have come up with a way to turn Skype into a money-maker. The company's shares are down 60 percent since the Skype deal was announced. For weary eBay investors, that IPO can't come soon enough.
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