eBay Releases IPO Plan for Skype

Online auction house eBay is making it clear that it expects VOIP company Skype, which the company acquired in 2005 for $2.6 billion, to start pulling its own commercial weight. April 14, eBay announced plans to separate Skype from the company, beginning with an IPO intended to be completed in the first half of 2010.

The company released a statement saying the decision to separate Skype was based on a timeline outlined by eBay’s president and CEO, John Donahoe. At one point, the company said it would spend a year evaluating Skype and its potential synergies within the eBay portfolio before making any decisions about Skype's future. Donahoe said it is clear that Skype has limited synergies with eBay and PayPay, eBay’s online payment service.

"Skype is a great stand-alone business with strong fundamentals and accelerating momentum," Donahoe said in a prepared statement. "We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential. This will give Skype the focus and resources required to continue its growth and effectively compete in online voice and video communications.”

In 2008, Skype generated revenues of $551 million, up 44 percent from 2007, and segment margins of approximately 21 percent. Registered users reached 405 million by the end of 2008, up 47 percent from 2007. eBay has said it expects Skype to be a billion-dollar company by 2011, nearly doubling 2008 revenues. However, eBay has written Skype down to $1.7 billion on its books. Donahoe said separating Skype will allow the company to focus entirely on its two core growth engines—e-commerce and online payments.

There were signs earlier this year that eBay was focusing more intently on Skype, which allows users to make calls for free (Skype-to-Skype accounts) or to call mobile phones and landlines for very low rates, aiming to expand the usage of Skype for business purposes. Donahoe also installed a new management team at Skype led by Josh Silverman, which the company said has driven stronger momentum and improved performance.

In March, Skype announced Skype for SIP—a beta program for a limited number of users that will bring VOIP (voice over IP) service to the office PBX. Some analysts have suggested that as PBX systems reach retirement age, Skype is positioned to enable enterprises to make better use of existing SIP PBXes and to alter the impression of Skype’s capability in the business world.

Skype also made two other large announcements in March, one pertaining to the upcoming availability of Skype on BlackBerry smartphones, widely used by business professionals, and the other about the availability of the service on Apple’s popular iPhone and iPod Touch.

More than 1 million people downloaded Skype for iPhone in the first 36 hours after it became available—and eBay reported Skype immediately became the No. 1 downloaded free iPhone application in more than 40 markets, including the United States, United Kingdom and Japan. One week later, downloads passed the 2 million mark, putting Skype on more than 6 percent of all iPhones and iPod Touches—and added almost half a million new Skype users in the process.