Blog Post

EBay Sells 65 Percent Of Skype For $1.9 Billion Cash

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

EBay is finally putting us out of our misery when it comes to speculation about Skype but it isn’t getting completely out of the virtual phone business. Instead, eBay (NSDQ: EBAY) is selling 65 percent of Skype to an investor group led by Silver Lake in a deal valuing the company at $2.75 billion — just enough to show a gain over the $2.6 billion 2005 acquisition. EBay will get $1.9 billion in cash at close, expected in Q4, and a note for $125 million, which would the total at $2 billion. The investor group includes Index Ventures (initial backers of Skype), Andreessen Horowitz (in its first major move) and the Canada Pension Plan (CPP) Investment Board. Not included: Skype founders Niklas Zennström and Janus Friis. Release.

The sale comes six months after eBay announced it would spin off the company, which it acquired for an astonishing $2.6 billion in 2005. But the risk never quite paid off, casting a shadow on Meg Whitman’s tenure at the head of eBay. EBay wrote down the deal by $1.43 billion in 2007; at the same time, Zennström left as CEO to work on expensive, ill-fated Joost. The deal press release effectively skips Skype’s founding and focuses on the fixes since John Donahoe became CEO of eBay and appointed Josh Silverman to head Skype. Revenues rose 44 percent to $551 million in 2008.

The deal has yet to close but Skype is already proclaiming a “new chapter.” In a blog post, Silverman talks about going independent once again — and back to the future, with the involvement of some of Skype’s earliest board members Mike Volpi and Danny Rimer. “It means we