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eBay to divorce Skype on Wall St

Hangs up on Web 2.0 telco dream

Internet Security Threat Report 2014

eBay plans to spin off Skype sometime in 2010, having failed to turn itself into a Web 2.0 telecoms hybrid.

eBay said today it's targeting an initial public offering for Skype in the first half of next year. The IPO idea follows recent rumors that Skype founders Niklas Zennstrom and Janus Friis were rounding up private equity partners to buy back their firm for $1.7bn. The IPO might also be a scheme for eBay to drive up the bidding price and make some of its money back.

The company has been looking for ways to offload its VoIP outfit since at least the beginning of this year, if only it could find someone willing to pay the right amount.

eBay's chief executive John Donahoe today cited "limited synergies" between the online auction house and VoIP engine, adding he thinks Skype will do better as a stand-alone publicly traded company. Donahoe said he's spent a year meditating on Skype's fate since he replaced Meg Whitman as CEO in April 2008.

Whitman is now campaigning to become governor of California based on her "solid" achievements as a business chief whilst running eBay.

The original bright idea behind Whitman's $2.6bn purchase of Skype in 2005 was to blend a communications unit inside its shoe, automotive and Star Trek memorabilia storehouse.

It was the kind of un-baked thinking that Silicon Valley championed as the very epitome of "rational exuberance". That is the opposite of the "irrational exuberance" of the dot-com era. Loosely translated: enthusiasm, without the crazy.

Four years later, eBay has been unable to logically integrate the technology into its core business. Turns out crazy is still crazy, no matter how rational it might seem during a tech bubble.

In 2007, eBay was forced to eat a $900m charge based on the decreased value of Skype.

eBay said Skype's 2008 revenue was $551 million, up 44 per cent from 2007. The company also expects to top $1bn revenue by 2011.

Perhaps the company is hoping an IPO announcement set for the distant future could work out two ways: either it gets investors excited about making Skype a separate firm, or it will urge those thinking about buying the company outright to reach a little deeper into their wallets. ®

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