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?

Should You VoIP?

My friend in Florida, Samuel, called me last week and immediately I noticed a difference in the sound quality compared to our usual conversations. At first, I dismissed it, thinking he was calling me from his cell phone. Five minutes into the conversation when the call suddenly dropped off I “knew” for sure he was calling on his cell. Until he called me back from his cell that is. It turns out that Samuel was using his regular home phone, but when he told me that he had a VoIP account that was all I needed to know.

What is VoIP? VoIP stands for Voice Over Internet Protocol which is a method for you to talk with someone via your broadband internet connection, cable or DSL. Your voice is translated into data and sent over the same connection used for your computer. VoIP has become popular because you can talk to people for just a few cents per minute…worldwide! In fact, in a recent ad I saw that one of the leading providers of this service is offering free calls to Canada and charging just 3 cents per minute for calls to Hong Kong and 6 cents per minute for calls to Copenhagen. People who frequently call international destinations love VoIP. Heck, at prices one-tenth the amount or less of conventional long distance rate VoIP does have a strong appeal for consumers.

Overall, plans seem to start at around ten dollars per month and increase to around forty dollars monthly depending on the plan. Many VoIP plans give plenty of “extras” as part of the package including:

* Call Forwarding
* Call Waiting
* Caller ID with the name
* Repeat Dialing
* 3-Way Calling
* Voicemail
* Call Blocking
* 911 Accessibility

I have seen plans that also offer widespread 411 accessibility, fax service, and virtual phone numbers which allow users to select phone numbers outside of their area code.

There are big drawbacks to VoIP and I learned what one of them was when I was talking with my friend in Florida: a power failure will mean that your phone will not work. My friend lives in an area of frequent lighting strikes and occasional power failures so each time there is an interruption he has to wait for power to be restored before he can call out from his home phone. Fortunately, he keeps his cell phone charged, but he does have to pay for most calls made on his cell. In some areas the savings from a VoIP account will be offset by cell phone usage.

911 calls also can be difficult to place; you may need to dial a lengthy ten digit number to the police, fire, or ambulance station instead costing you valuable time in an emergency. Some providers are working hard to overcome the problem, but it hasn’t quite been overcome.

In all, VoIP usage continues to grow and it will probably become an important way for many to place calls, particularly internationally. You can’t stop power outages and 911 issues remain, so weigh your options carefully before making the move over to Voice Over Internet Protocol.

Author Information:

Matt Keegan is The Article Writer who writes on a variety of social, human interest, as well as business related topics.