eBay Planning IPO For Skype In 2010

imageeBay (NSDQ: EBAY) said Tuesday it would spin off its Skype calling service via an initial public offering during the first half of next year. The announcement culminates months of speculation about eBay’s plans for Skype and comes a day after the auction site announced plans to shed another non-strategic asset, website rating service StumbleUpon.

In a statement, CEO John Donahoe said, “Skype is a great stand-alone business with strong fundamentals and accelerating momentum. But it’s clear that Skype has limited synergies with eBay and PayPal…. In addition, separating Skype will allow eBay to focus entirely on our two core growth engines — e-commerce and online payments.” (Full release after the jump.)

eBay’s core online auction business is struggling from the economic slowdown as well as steep competition, and shedding Skype will allow the company to double down on fixing that business. eBay has also been reported to be interested in purchasing a large stake in Korean online auction site, Gmarket.

The decision to spin off Skype should provide a shot in the arm to the IPO market, which has been dormant for two straight quarters.

Almost from the day that it purchased Skype in 2005 for $2.6 billion, there were doubts about the rationale for the deal. eBay was never able to deliver on its original promise of integrating its own software with Skype to “ease communications and increase the level of trust between its buyers and sellers.” And the company wrote down much of the purchase price in 2007.

However, Skype has continued to post meteoric growth even in eBay’s hands. Skype’s revenue jumped 44 percent last year to $551 million and the number of registered users jumped 47 percent to 405 million. Revenue is expected to reach $1 billion in 2011.

Donahoe had fueled speculation that he would spin off Skype ever since suggesting earlier this year that the company would make a “great stand-alone business.” Several parties had been rumored to be interested in purchasing Skype, including the company’s two founders, Niklas Zennstrom and Janus Friis, although their offer was reportedly too low.

eBay Inc. Announces Plan for 2010 Initial Public Offering of Skype


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