Skype Sold for $2.75 Billion

Word just came in — the deal is official. eBay is selling Skype in a deal that values the Internet calling service at $2.75 billion. eBay will get $1.9 billion in cash, a $125 million note, and will give up 65 percent of the company to the buying consortium led by Silver Lake that includes Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board. eBay gets to keep 35 percent of Skype. The transaction, which is not subject to a financing condition, is expected to close in the fourth quarter of 2009. And it looks like the current CEO, Josh Silverman, is going to keep running the service, which is actually good news.

“This is a great deal, unlocking both immediate and long-term value for eBay and tremendous potential for Skype,” said eBay Inc. President and CEO John Donahoe. “We’ve acted decisively on a deal that delivers a high valuation, gives us significant cash up-front and lets us retain a meaningful minority stake with talented partners. Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments businesses. As a separate company, we believe that Skype will have the focus required to compete effectively in online voice and video communications and accelerate its growth momentum.”

“This deal achieves our goal of delivering short- and long-term value to eBay and its stockholders, without the possible delays and market risk of an IPO,” Donahoe said. “Selling Skype now at this great valuation, while retaining an equity stake, makes sense for the company. And it allows us to focus all of our energies on the opportunities in front of PayPal and eBay.”

Some Skype Facts
Skype generated 43.4 billion minutes of free, Skype-to-Skype (computer-to-computer) traffic in 2007 and 65.5 billion minutes in 2008.
Skype users generated approximately 4.2 billion minutes of paid international traffic in 2008.
Skype also reported 5.6 billion minutes of paid, computer-to-telephone traffic in 2007, and 8.4 billion minutes in 2008.
TeleGeography estimates that approximately 33 billion minutes of Skype’s computer-to-computer traffic was international, up from 22 billion minutes in 2007.
Skype accounted for 8 percent of all international voice minutes in 2008, up from 6 percent in 2006
Skype is the largest provider of cross-border voice communications in the world.
Source: Telegeography

So Donahue gets to say that he got the higher valuation of Skype, got rid of a potential legal nightmare and can get any upside that comes with the initial public offering of the stock. Seems like a win-win, but that IPO — don’t count on it. To be honest, this deal makes much more sense compared to all the rumors that were floating around earlier.

If you think about it, what Donahoe just did was follow the golden rule of business: If you’ve got a problem, make it someone else’s problem. And the problem for the new buyers is that the legal issues of Skype are not going away. Some of my smart friends think that Skype can sidestep these problems by switching to a SIP-based infrastructure, but I won’t hold my breath.

Any SIP-based infrastructure would sharply increase the need for building a massive global infrastructure. It would also mean working with partners (that make Skype devices) to re-configure their products and getting 400 million-plus users to switch to a massive new model. In other words — like skating in the middle of a semi-frozen lake underneath a brightly shining sun.

So the new investor group will have no option but to settle with Niklas Zennstrom and Janus Friis if they want to use the new technology. For a nice piece of Skype, the duo would settle. And they will win again. Not that there’s anything wrong with that.

Photo courtesy of Casey Serin via Flickr through the good work of Phil Wolff.

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