EBay Unveils Skype IPO Plans

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Whatever form the separation takes, virtually everyone agrees Skype shouldn't remain part of eBay—though analysts speculate eBay may retain a minority stake. EBay, which specializes in online auction and other electronic commerce, initially viewed Skype as a way to help buyers and sellers communicate and carry out business. But the company never succeeded in integrating Skype deeply with the rest of its divisions, and in 2007 wrote down $1.4 billion of its value. Goldman Sachs (GS) will handle the IPO for eBay.

Amid accelerating competition from Amazon.com (AMZN), John Donahoe, who succeeded Meg Whitman as eBay CEO in early 2008, is focusing eBay on its core businesses of e-commerce and PayPal online payments. In January, eBay posted its first-ever quarterly decline in revenue. "Management is very engaged in trying to close the big performance gap between itself and Amazon," says Jeffrey Lindsay, an analyst with Sanford C. Bernstein. Shares of eBay declined 1.71%, to 14.38, on the Skype IPO news.

Skype Takes on New Markets

As part of the company's renewed emphasis on core businesses, eBay on Apr. 13 sold Web recommendations site StumbleUpon back to its founders. Bernstein analysts speculate that ticket site StubHub could be sold as well.

And in the interest of expanding its core e-commerce business overseas, eBay reached an agreement on Apr. 14 to buy a controlling, $413 million stake in Gmarket (GMKT), the leading online auction site in South Korea, The Wall Street Journal reported. More than half of eBay's revenue comes from international business, but the company has struggled to establish a strong foothold in Asia, where homegrown e-commerce sites like Gmarket have proven more popular with buyers and sellers. Gmarket "came out of nowhere to take material share from eBay [in South Korea], and I think this is eBay admitting it's a viable business and that they want to consolidate that," says Scot Wingo, CEO of ChannelAdvisor, which offers services to sellers on e-commerce sites around the world. An eBay representative declined to comment on The Wall Street Journal report.

As its parent shears itself of peripheral businesses, Skype is entering new markets. Now mainly used for calling amid PCs, Skype is making a big push onto cell phones. When Skype introduced its first Apple (AAPL) iPhone application on Mar. 31, more than 1 million people downloaded it in the first 36 hours. Today, Skype is one of the most popular free iPhone applications in more than 40 markets. The app has already been downloaded onto more than 6% of all iPhones and iPod touch media players, and has brought almost 500,000 new users to Skype, according to eBay.

In addition, Skype could also grow its online-remittances business and expand its array of social-networking features, Shaer says. "Skype needs to find its place in the social world," he says. Ultimately, Skype could find itself in closer competition with such sites as Facebook or Twitter. Indeed, Skype Chief Operating Officer Scott Durchslag recently told BusinessWeek.com, "I see [Skype] as a Ferrari that's only firing some of its cylinders." And if plans for an IPO come to fruition, a lot of people may soon have a chance to own a piece of it.

Kharif is a senior writer for BusinessWeek.com in Portland, Ore. Douglas MacMillan is a staff writer for BusinessWeek in New York.