EBay Sells Skype, Keeps 35% Stake

Posted by: Douglas MacMillan on September 01, 2009

In a deal announced Tuesday morning, eBay has agreed to sell Internet calling service Skype to a group of investors which includes private equity firm Silver Lake, Index Ventures, Canada Pension Plan Investment Board, and Andreessen Horowitz, the venture capital fund launched by eBay board member Marc Andreessen earlier this year.

The deal, which the New York Times first reported, values Skype at around $2.75 billion. EBay will get $1.9 billion upfront in cash, around $125 million in short-term debt, and will retain a 35% stake in the company. The San Jose company purchased Skype in 2005 for $3.1 billion, but later wrote down $900 million of that investment.

Though the voice-over-Internet service added a high-growth business to eBay, generating $526 million in revenues and adding 129 million users last year, investors and analysts criticized its incompatibility with the company’s online auction and payments businesses. In April, eBay announced its plans to spin off Skype in an initial public offering in 2010 — a move that likely brought its eventual buyers to the negotiating table.

One risk for Skype’s new owners is the prospect of losing rights to the service’s core peer-to-peer technology, which eBay was only licensing from Joltid, a company controlled by Skype founders Niklas Zennstrom and Janus Friis, since the 2005 purchase. An ongoing legal battle between eBay and Joltid has forced the auction company to develop a replacement technology should it lose the right to retain the license in court. It’s unclear whether the replacement technology is now fully developed, whether Silver Lake and the other buyers inherit it, and if Zennstrom and Friis themselves have a role in the purchase of Skype.

The sale sees John Donahoe undoing a highly criticized acquisition of his predecessor Meg Whitman, who he took the reins from in early 2008. “We’ve acted decisively on a deal that delivers a high valuation, gives us significant cash up-front and lets us retain a meaningful minority stake with talented partners,” Donahoe said in a statement. In May, he was quoted as saying a $2 billion valuation for Skype was “low.”

Donahoe and his team are now freed up to focus on growing the company’s sluggish e-commerce business and realizing the huge potential for online payments business PayPal. Meanwhile, Skype remains a top candidate for a public offering in the next year.

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Reader Comments

Berith

September 1, 2009 12:51 PM

Skype is done! Goodbye Skype.

Just like Marvel to Disney.

All these companies are tanking... need leverage and will sell their souls just to keep them alive.

Good riddance.

GOOD GRIEF!

September 1, 2009 01:04 PM

And IF the voters are dumb enough to make dilettante Mega-Nothing, Governor, WHO, or WHAT, will clean up that forthcoming enormous mess? Oh WOE!!! BEWARE the dilettante - aka, Schwartzie in drag?

THANK YOU, John Donahoe!!! Maybe, you should be CA Governator???

Thomas

September 1, 2009 01:12 PM

Ebay has completely ruined their company by manipulating the search and eliminating honest feedback from both parties. They've driven off millions of sellers(who were also buyers by the way) and their stock will continue to tumble. Selling off most of the Skype unit isn't going to make much of a differemce. Ebay's a big ship, and it will unfortunately, continue to sink.

Karl

September 1, 2009 01:40 PM

ALL Publicly Held Companies eventually LOSE SIGHT of how to operate a business, and how to run that business in an HONEST & ETHICAL way. That's WHY the economy in the USA COLLAPSED. That's WHY the stock market CRASHED! It's WHY we'll see another COLLAPSE in the coming months, in my opinion. Welcome to America- IN FRAUD WE TRUST!

AXA

September 1, 2009 02:50 PM

It is extremely difficult to search and find something on ebay these days..and when you find it ..it is usually more expensive than buying elsewhere ...

Also can anyone look into the claims of Paypal being a "payment intermediary”
REF http://en.wikipedia.org/wiki/PayPal .Most of their activities are borderline like of a bank and need some Federal Regulation. This will also uncover those dozens of Swiss and German accounts and banks operated by these schemers for their 'activities' :-)


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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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