eBay plans 2010 IPO for Skype

Ebay announced on Tuesday afternoon that it plans to spin Skype off from the company, starting with an IPO (initial public offering) it intends to be completed in the first half of 2010, with specific timing of the event "based on market conditions." Ebay CEO and President John Donahoe pronounced Skype as a "great stand-alone business with strong fundamentals and accelerating momentum," but it has "limited synergies" with eBay and PayPal.

Yesterday's announcement is the latest in the ongoing soap opera between Skype and its parent. After eBay purchased Skype for an initial $2.6 billion in 2005, with bonuses taking the price up to $3.4 billion total, the company has had to write $1.4 billion off the books and has struggled to figure out exactly what to do with the company.

However, such a struggle apparently is not clouding the minds of Donahoe and the eBay executive to get the best deal they can for the company (Hey, it's eBay, it's in the culture). Lots of buyout talk has floated around since Donahoe suggested that Skype was on the block, with a range of suspects cited - Cisco, Google, Microsoft.

The most recent - and apparently the most serious - offer appears to have come from Skype co-founders Niklas Zennstrom and Janus Friis. The two had reportedly lined up about a billion dollars in private equity funding and had asked eBay to provide another billion in debt/self-financing to make the deal happen, but eBay apparently wasn't impressed with either the amount and/or the terms.

Wall Street analysts have been quick to dog eBay for purchasing Skype and have made calls for the company to get rid of it, but eBay seems to realize that a company that generated $551 million in 2008 with margins of around 21 percent isn't something you unload at a fire sale. Skype is expected to top a billion dollars in revenue in 2011.

Readers should be cautious that eBay's Skype IPO announcement is most certainly not the best and final offer we'll hear on the matter. Zennstrom and Friis may try to line up a better, more lucrative offer, and other players may be waiting in the wings to snatch up Skype prior to a public offering. Stay tuned.

For more:
- eBay's Skype IPO statement. Release [1].