Sold! eBay jettisons Skype in $2 billion deal
E-commerce giant eBay announced Tuesday that it is selling its Skype unit to an investor group that includes Marc Andreessen's new venture.
Under the deal, eBay will receive approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million, for a total of $2.025 billion. The participants expect the deal to close in the fourth quarter.
The investor group, which will take a roughly 65 percent stake in Skype, is led by Silver Lake and includes Index Ventures, Andreessen Horowitz, and the Canada Pension Plan Investment Board. The remaining 35 percent of the Internet telephony service will be retained by eBay.
The parties said the deal values Skype, which is likely to see an IPO in the coming months, at $2.75 billion.
The sale of Skype had been expected for some time. Word of Tuesday's impending sale to the private investor group was first reported late Monday in The New York Times.
The Andreessen Horowitz venture capital group was launched in July by Marc Andreessen, the founder of Netscape and co-founder of Opsware, and Ben Horowitz, also co-founder of Opsware.
With the sale, eBay acknowledged that things hadn't worked out as planned with Skype, which it acquired for $2.6 billion in 2005 with the plans to offer customers the ability to discuss their transactions in real time. Over the course of the four years since then, eBay found that its acquisition failed to provide what it sought.
"Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments businesses," eBay President and CEO John Donahoe said in a statement Tuesday. "As a separate company, we believe that Skype will have the focus required to compete effectively in online voice and video communications and accelerate its growth momentum."
Lead investment firm Silver Lake echoed the forward-looking sentiments.
"This transaction benefits...will allow Skype the opportunity to accelerate the growth of its business by harnessing the deep technological and company development expertise that resides within the investor group," Egon Durban, managing director at Silver Lake, said in a statement.
In 2007, eBay said it would take a $900 million so-called impairment writedown against the value of Skype, meaning that eBay had been forced to reassess the value of the Internet telephony company relative to its overall business. By recording a charge, the company essentially announced it had taken a loss on its original investment.
When eBay announced Donahoe as its new CEO in 2008, he indicated that the company would take a year to evaluate the future of its online phone and video-conferencing service.
In April, eBay announced plans to spin off Skype, with an IPO in the first half of next year.
Along the way, reports had surfaced that Skype founders Niklas Zennstrom and Janus Friis were interested in repurchasing the company.
Clarification at 7:44 a.m. PDT: This story miscast the value of the deal. eBay gets approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million, for a total of about $2.025 billion. The companies say the deal values Skype at about $2.75 billion.
If this isn't a reason Meg Whitman would make a crummy governor I don't know what is. No one ever understood that purchase.
Skype was a great idea for eBay use to bring buyer and seller together, but did not work out as well as expected due to legal claims of the previous owners. It was an even greater idea to do an IPO for Skype had the economy been stronger.
Skype is a great service and it should do very well in the days ahead... and eBay still own 35% of it, a notable vote of confidence in the future of the new company. They will be getting all their money back and huge profits.
You must be joking.
When Meg Whitman took over eBay, it was a puny company with revenues of just $4 *million*. By the time she left, eBay's market cap was $30 billion on revenues of $8 billion. That's 200,000% growth in revenue under her watch!
If anything, during her tenure Whitman quickly turned Skype around from a money-losing company (at the time of eBay's purchase) into a profitable division with $500 million+ in annual revenues with 20% profit margins, which is impressive in itself. Scores of "pundits" said Skype could never make any money and Whitman proved them wrong.
Anyway in the long run eBay will break-even or even turn a profit with Skype, even accounting for the $900m impairment. Remember eBay will still hold 35% of Skype (that's about $1 billion in equity), get $2 billion cash from the transaction, and will continue to benefit from Skype profits including and any future IPO by the new management.
"Skype was a great idea for eBay use to bring buyer and seller together"
LOL. If you really think that, you have the same delusions as eBay had.
Sellers don't want to be called by any random visitor to eBay. Any seller could have told eBay before they bought Skype.
It was an expensive idea which is chose to implement. On the idea itself did not turn out so good, whether buy Skype will turn out to be a good deal in the long term is still unknown.
The original thinging was Internet related" soworth an investment.
But, it wasn't truly treated as either a line of business extension,or a stand-alone enterprise.
Hence the less-than-stellar performance-compared to Vonage, for instance, but still establishing a place. That Fox uses Skype remote Videocasts is expressive of the potential, and the technology will develop to assist the AnyThing, AnyTime, AnyWhere (AAA) concept.
- by Fil0403 September 5, 2009 1:39 PM PDT
- Never understood this purchase, seems now I had reasons for that.
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