eBay has moved to crush speculation in the press that Skype’s founders are about to take over the company from eBay, at a considerably lower valuation than it paid for it. Instead Skype will be floated as a separate company by eBay during 2010, a year from now.
Various US press reports last week quoted Skype founders Niklas Zennstrom and Janus Friis saying they would love to buy the service back, a fact that has almost been purged from all Google News after eBay appointed Goldman Sachs to float the unit.
There has been some speculation that Skype would be separated from eBay after executives last year began to say that it hadn’t integrated well and didn’t really fit in its product suite. The original justification for buying it was the hope that all eBay users would use Skype to speak to one another about transactions. We imagine that someone had a thought to re-create genuine accelerated vocalized auctions in the process somewhere (though that was never said).
It was these executives talking that led to Zennstrom piping up and offering to buy his baby back, and in response to that Goldman Sachs has now been touting a valuation of anything up to $3.1 billion in 2010 for Skype, because this, coincidentally, is the amount that was paid to the VC backers of Skype plus the two founders. Earlier reports had the founders buying control of Skype for something closer to $1 billion.
If eBay manages to justify those Goldman Sachs figures then eBay will never have to take a big writedown in goodwill for the high priced purchase. But it does involve some crazy crystal ball gazing, as no-one has a clue what the US financial markets will look like a year from now.
“Skype is a great stand-alone business with strong fundamentals and accelerating momentum,” said eBay Inc.’s President and CEO, John Donahoe. “But it’s clear that Skype has limited synergies with eBay and PayPal. 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 addition, separating Skype will allow eBay to focus entirely on our two core growth engines’e-commerce and online payments’and deliver long-term value to our stockholders.” Which we think is a fair summary.
The company had to announce something, because Donahoe said when he became eBay’s CEO last April that he would spend a year evaluating Skype before making any decisions. Well the year’s up but this doesn’t look anything like a decision, in fact he is really putting off the decision for another year.
In 2008, Skype generated revenues of $551 million, up 44%, with margins of 21%. Registered users were just 405 million by the end of 2008. The company now expects Skype to top $1 billion in revenue by 2011 and registered users are beyond 600 million.
Most recently, the release of the Skype for iPhone application has had everyone up in arms predicting mobile Skype being as big if not bigger than Skype, with two million people downloading it in the first 48 hours.
Who’s to say that Zennstrom and Friis cannot buy heavily into the floated Skype with their own cash, and assume control sometime in 2010. We wouldn’t bet against it. The tech couple had KKR, Providence, Warburg Pincus and Elevation Partners all hot under the collar to invest but the deal they came up with fell just short of being acceptable to eBay because it would have had to retain a shareholding long term in order to get back all the money it put up for the company. The delayed floatation seems more of a holding action than a real move. In fact it wouldn’t surprise us at all to see eBay change its mind, depending upon the state of the financial markets and go with an improved founders’ offer at some stage prior to mid-2010.