Ebay Plans To Rid Itself of Skype
Ebay, Inc. has been in the news a lot lately, most recently for its sale of StumbleUpon (SU) — the online recommendation site — back to its original owners for an undisclosed sum. Ebay acquired SU in 2007, a move that was widely panned by SU devotees. Now, Ebay is looking to unload another acquisition, this time its internet-calling unit, Skype. By 2010 Ebay plans to hold an IPO or Initial Public Offering, which will separate Skype from its parent.
The Many Brands of Ebay
Ebay, Inc., which is best known for its online auction site bearing the same name, has ventured well beyond its base since being founded in 1995. Like Amazon, Google, Microsoft, Yahoo and other big internet names, Ebay has acquired quite a few companies over the years including Half.com, Paypal, a portion of Craiglist, StubHub, Shopping.com and others. Some of the acquisitions have been a very good fit, such as Paypal, while others have been nothing but trouble. Skype falls into the latter category.
According to The Wall Street Journal (WSJ), Ebay is selling Skype in response to investor demands to rid itself of the unprofitable business. Ebay purchased Skype for $2.6 billion in cash in stock in 2005, but took a $1.4 billion write off in 2007 to reflect the unit’s diminished value. When John Donahue took over Ebay in 2008, he announced that Skype seemed to be a poor fit with the rest of the company’s business, signaling that its sale was forthcoming.
Goldman Sachs to Oversee IPO
Ebay has hired the prestigious Goldman Sachs Group to handle the public offering which is expected to be held in early 2010. Skye’s founders – Niklas Zennstrom and Janus Friis – have attempted to buy Skype back from Ebay, but their price was well below what Ebay wanted for the unit. When the IPO is held next year, Ebay says that it will remain a shareholder in the new company.
The WSJ says that waiting until next year to hold an IPO for Skype may work to Ebay’s advantage, especially given the current state of the economy where the IPO market has largely been dormant since last summer. But, the newspaper also says that investors may be leery about investing in Skype given the bad experience many had when Clearwire Corp. had their own IPO in 2007. Back then, Clearwire fetched $25 a share, but was later merged with a Sprint unit. Clearwire investors were clearly burned in the transaction as their stock values dropped to about $20 per share when all was said and done.
As for Skype, the unit continues to bring in hundreds of millions of dollars annually in revenue, charging just 2.1 cents per minute for users to call landlines while offering free calls to other Skype users in most instances. Perhaps the most tantalizing aspect of Skype is that the service now claims more than 400 million users worldwide.
Related Reading: Skype, the Britney Spears of Telecommunication?
Tags: Amazon, Cleawire, craigslist, eBay, Goldman Sachs, Google, Half.com, initial public offering, internet telephony, IPO, Microsoft, Paypal, Shopping.com, Skype, Sprint, stock, stock offering, StubHub, The Wall Street Journal, VoIP, Yahoo!
Marketing, Social Media, Technology | Matthew C. Keegan, 15 Apr 09
By Business Intelligence Consulting, April 15, 2009 @ 5:02 pm
Its interesting to think that Ebay has gone to such lengths to acquire so many companies but is now trying to get rid of them. I can’t blame them, but as far as I knew, Skype was still doing well. But that just goes to show how much I know.
By Matthew C. Keegan, April 16, 2009 @ 5:29 am
BIC, Skype has made EBay plenty of money. They just realize that they overstepped their area of expertise which is online shopping, auctions and the like. In my opinion, EBay is attempting to return to its core business, ridding itself of websites that do little in the way of adding value to the bottom line.
By custom web design, April 16, 2009 @ 6:48 pm
I do agree that it would be better if Ebay concentrate on their online shipping business than acquiring a lot of other companies. Too bad Skype wasn’t of big help to their company, knowing that a lot of people are actually into Skype due to low-cost local and international calls.
By Raghhav, April 16, 2009 @ 7:31 pm
I agree and one should stick to their core business and that is going to get done finally. Thanks for sharing info.
By Marriage Help Man, April 16, 2009 @ 10:43 pm
Ebay, like Hardees, decided that it couldn’t be everything to everyone. But you’d think they’d hire people to run Skype and still make money at it. Maybe they see Skype as being obselete at some point.
By Matthew C. Keegan, April 17, 2009 @ 4:08 am
@Marriage Help — I understand the Hardees analogy. When you expand beyond your base, you get burned. Hiring a team to manage Skype would make sense, but I have the feeling that they think an IPO would provide a better return on their investment.
@Raghhav — Lots of companies realize they overexpanded earlier this decade and are now paying the price for their aggressiveness. Much better is it to return to your base than to stay out in the wilderness exposed to the wolves.
@Custom Web — I like Skype, though I don’t use it. I tried it a few years ago when their calls were fuzzy, but that turned me off. Later, I learned that they fixed that problem, but I’ll wait before rejoining.
By Van, April 23, 2009 @ 1:31 am
Well a lot will surely wish for Skype to do well as it has been a very good help to them to be able to communicate with business associates, family and friends.
Van
By penisvergrösserung, July 3, 2009 @ 9:03 am
Skype is a good communication program… it´s time to get money with it, don´t you think so?
Personally i like this program, i use it long time ago, but if you don´t have a mic i recommend msn, i think it´s the best program.