Wednesday, September 2, 2009

eBay Sells Skype

Internet auction site, eBay, announced yesterday that it is selling off a majority interest in Skype, which provides voice and video connections over the Internet. Apparently there were fewer "synergies" between eBay and Skype than originally claimed, although it looks like the acquisition and subsequent sell-off won't end up costing eBay that much in dollar terms.
eBay (EBAY) will sell a controlling share of the Internet-calling service to a group of investors led by private equity firm Silver Lake for $1.9 billion in cash and $125 million in short-term debt. The sale values Skype at $2.75 billion, not far below the price eBay paid for the business in 2005, and higher than the value recently placed on Skype by some Wall Street analysts.


  1. Something else to consider is the growth of Facetime, iPhones, and iPads around this time period. That may have partially explained the reason to sell off the company. Also, I'm not "techy", but I would also assume the complications and legal issues with running an online auction site with payment and dispute resolutions wouldn't have been very synergistic with a bandwidth sucking video chat service that wouldn't have required as many lawyers and resolution policies.

  2. The extend decision for Ebay selling its controlling interest in Skype seems to be a good decision. In 2009 Douglas Macmillan quotes:

    “EBay Chief Executive Officer John Donahoe says there's no downside to his company's plan to sell most of its Skype division. "EBay was able to have its cake and eat it, too,"

    As we can see from Macmillan analysis, ebay basically broke even selling about 65% of its investment to the “private equity firm Silver Lake for $1.9b in cash and another $125 million in short-term will still retaining a 35% stake in a high growth company” It is apparent that ebay consider its extent decision very closely in regards to continuing its subsiding of Skype development into what “Whitman hope that buyers and sellers would use as a communications channel which never came to fruition”

    Whitman made the correct decision because there was no demand for the video communications by customers and would eventually become a lower producing asset. Selling Skype allowed Whitman to recoup costs and use it for a higher producing asset while positioning with the remaining 35% ownership as an investment for possible a future IPO.