eBay is finally dumping Skype… on the public market! Specifically, it’s planning to spin the company out in an IPO next year.
(In the meantime, by announcing the deal now, it can get investors excited about the separation and try to goad potential acquirers into ponying up and buying Skype outright — which is presumably part of the thinking here.)
Either way, the spin is good news for eBay investors. eBay never should have bought the thing in the first place. Now it can drop it, collect some cash, and focus on its core business.
If Skype ends up going public, meanwhile, it’s also good news for public-market investors, who haven’t had much to be excited about in the past couple of years. Skype’s a great company, and it’s been hidden inside eBay forever. Now we’ll get to look at it in detail.
SAN JOSE, Calif.–(BUSINESS WIRE)–eBay Inc. (Nasdaq: EBAY – News) today announced that it plans to separate Skype from the company, beginning with an initial public offering that is intended to be completed in the first half of 2010. Specific timing of the IPO will be based on market conditions.
“Skype is a great stand-alone business with strong fundamentals and accelerating momentum,” said eBay Inc.’s President and CEO, John Donahoe. “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. This will give Skype the focus and resources required to continue its growth and effectively compete in online voice and video communications. In addition, separating Skype will allow eBay to focus entirely on our two core growth engines—e-commerce and online payments—and deliver long-term value to our stockholders.”
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 Inc. portfolio before making any decisions about Skype’s future. Donahoe also installed a new management team at Skype led by Josh Silverman, which has driven stronger momentum and improved performance. In 2008, Skype generated revenues of $551 million, up 44 per cent from 2007, and segment margins of approximately 21 per cent. Registered users reached 405 million by the end of 2008, up 47 per cent from 2007, and user metrics improved significantly throughout the year. The company recently announced that it expects Skype to top $1 billion in revenue in 2011, nearly doubling 2008 revenues.
“Under the leadership of Josh Silverman and his management team, Skype has become a stronger business in the past year, and I expect it will be even stronger a year from now,” Donahoe said. “Skype has accelerating global user growth and strong fundamentals, diversified revenue streams and is competitively positioned in a large market. We expect Josh and his team to continue delivering results as we prepare Skype for an IPO.”
Most recently, the release of the Skype for iPhone application has generated a great response. More than one million people downloaded Skype for iPhone in the first 36 hours after it became available—and Skype immediately became the No. 1 downloaded free iPhone application in more than 40 markets, including the U.S., UK and Japan. In just over a week, downloads passed the two million mark, putting Skype on more than 6 per cent of all iPhones and iPod Touch – and adding almost half a million new Skype users.