When online auction portal eBay bought web telephone service Skype in 2005, many considered the acquisition as a prudent investment. However, with the new entity adding hardly any value over four years, eBay is desperate to get rid of it, even wiling to settle for half of the $3.1 billion it originally paid.
The fast-growing Skype, which lets fellow Skype customers call each other for free and posted $550 million in revenue in 2008, was acquired by eBay after former chief executive Meg Whitman thought Skype could find an audience in eBay's auction sellers and buyers.
But current CEO John Donahoe has said that Skype has no synergies with the rest of eBay, which also owns Web payments service PayPal. Donahoe has said the company would do what was best for eBay and Skype, comments that some on Wall Street have taken as an interest in selling. Now, Skype's founders, Niklas Zennstrom and Janus Friis, are reportedly in talks with several private equity firms and are amassing their own financial resources to make a bid for the internet phone business.
According to sources, the duo was hoping to raise about $1 billion in equity from private investors. Another potential scenario cited by the source would see eBay putting up the rest of the financing via a seller's note for a deal estimated to be worth more than $2 billion.
eBay is viewed by analysts as a company with modestly talented management running a company with a large online auction business which is barely growing. eBay's crown jewel is PayPal, the online payment service, which is highly profitable and growing.
In addition to those two businesses, it owns Skype, which has no strategic or tactical relationship with the other two divisions. According to eBay's 10-K, its ''communications division'', which is how it refers to Skype, brought in $381 million last year. eBay's entire revenue was $7.7 billion. It also reported that the cumulative number of Skype registered users increased to 405.3 million at 31 December 2008 from 276.3 million on 31 December 2007. That makes the revenue yield of each user remarkably small.