Lack of 'synergy' pushes eBay to spin Skype off

by Staff, Brand Republic 15-Apr-09, 08:55

SAN FRANCISCO - eBay has unveiled plans to float online phone firm Skype with an initial public offering due in the first half of 2010.

The sale comes with an admission from eBay's chief executive officer and president John Donahoe that there was little business benefits in hanging onto Skype.

Donahoe said: "Skype is a great stand-alone business with strong fundamentals and accelerating momentum. But it's clear that Skype has limited synergies with eBay and PayPal."

He said operating Skype as a stand-alone publicly traded company was the best way to maximise its potential and at the same time allow eBay to focus what it does best.

"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."

The online auction firm said that the decision to separate Skype is based on a timeline outlined by Donahoe when he became eBay's CEO in April 2008.

At the time, the company said it would spend a year evaluating Skype and its potential synergies within the eBay portfolio before making any decisions about its future.

Since arriving at ebay Donahoe has installed a new management team at Skype led by Josh Silverman, which has driven momentum and improved performance.

In 2008, Skype generated revenues of $551m, up 44% from 2007 while registered users reached 405m by the end of 2008, which is up 47% on 2007.

Ebay said recently it expects Skype's revenues to top $1bn, nearly doubling 2008 revenues.

Donahoe said: "Under the leadership of Josh Silverman and his management team, Skype has become a stronger business in the past year, and I expect it will be even stronger a year from now.

"Skype has accelerating global user growth and strong fundamentals, diversified revenue streams and is competitively positioned in a large market.

"We expect Josh and his team to continue delivering results as we prepare Skype for an IPO."

Most recently, the release of the Skype for iPhone application has generated a strong response. More than one million people downloaded the free app in its first 36 hours -- making Skype the biggest free downloaded iPhone application in more than 40 markets, including the US, UK and Japan.