EBay plans to spin off its Skype unit, acknowledging that the web telephone service does not fit with the rest of the company, in an indictment of former chief executive Meg Whitman's acquisition strategy.
EBay, whose shares rose 3 per cent in after-hours trade, said yesterday it was planning an initial public offering for Skype by the first half of 2010, a move widely seen as putting a 'for sale' sign on the unit to fetch potential buyers.
Two people familiar with eBay's thinking said the online auction company could seek substantially more than $2 billion for Skype. But some analysts doubted that it could fetch so much in current markets.
The San Jose-based eBay bought Skype in 2005 for $2.6 billion, in what was its biggest ever acquisition.
John Donahoe, who became eBay chief executive a year ago, has vowed to evaluate whether the telephone service was a good fit with the rest of the company, which includes Web payments service PayPal along with its core auctions business.
"We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential," Donahoe said in a statement last night.
Many on Wall Street raised eyebrows when Whitman purchased Skype, sceptical of the high price and eBay's claims that its customer base of buyers and sellers would embrace Web phone calls.
"That Skype didn't fit into the rest of the business was apparent from day one," said RBC analyst Stephen Ju.
"The book value of this asset is about $1.7 billion. It wouldn't surprise me if they would try to get something like $2 billion," he said.
That implies a roughly 10 times EBITDA (earnings before interest, taxes, depreciation and amortization) multiple based on Skype's 2011 revenue target of $1 billion and its current operating margins of 20 per cent, he added.
Ju noted it was hard to put a value on a Skype IPO given the uncertainty over the state of the market in 2010.
Reuters