Should eBay Spin Off Skype? The Debate Continues

Should eBay spin off Skype? While it’s a bad time for eBay (s EBAY) to try and spin off it or anything else as the company tries to refocus itself and save its core franchise of online auctions, the answer to that question is yes. Armed with comments made by eBay CEO John Donhaue, folks have started to write about a Skype spinoff. We already had a conversation about this whole spinoff stuff — last week.

CNET has a (far too long) article that essentially makes two new points: One is that Skype, according to its COO Scott Durschlag, has been profitable for the past seven quarters. eBay never really explains how profitable, however, and until they do, it all sounds like financial mumbo jumbo to me. CNET then channels Jim Friedland, senior Internet analyst with Cowen & Co., to name Microsoft (s msft) as the most likely Skype suitor, saying, “Microsoft would probably be doing this to strengthen its Internet position and to buy market share.”

In my opinion, which I shared with Sarah Lacy and her viewers yesterday, Yahoo (s YHOO) is a much better buyer for Skype as it has experience working with consumers and offering paid services. As for other likely buyers, I would put large telecom operators such as British Telecom (s BT) and France Telecom (s FT) high on the list. A reader points out that Hutchinson’s 3  could be a good buyer as well. 

As far as I’m concerned, Skype isn’t as richly valued as analysts it is; I think it would be lucky to get three times its revenues. My best guess would be that they fetch between $900 million and $1.2 billion.

Why? As I pointed out last week, Skype has some serious growth challenges. But don’t tell that to analysts, who measure everything with a hockey stick.

“As more people adopt Skype, there’s potential for the asset to peak in value,” Friedland said. “It won’t likely happen for another five to eight years. And unless Skype comes up with a new meaningful revenue driver, it could start to decline.”

I’m hoping to catch up with Skype CEO Josh Silverman soon to get a more in-depth update — and to find out why my pessimism about his company is not justified. 

Watch the video of my conversation with Sarah Lacy.