On Wednesday, eBay put an end to speculation about the fate of Skype. eBay will spin off the Internet VoIP telephone service and make an initial public offering in the first half of 2010.
Although Skype is a great stand-alone business with strong fundamentals and accelerating growth, eBay President and CEO John Donahoe said it’s clear that Skype has limited synergies with eBay and its PayPal subsidiary.
“We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential. This will give Skype the focus and resources required to continue its growth and effectively compete in online voice and video communications,” Donahoe said. “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.”
Growing Revenue
The decision to separate Skype isn’t a sudden one. Donahoe outlined a time line for determining how to deal with the phone service when he took over as CEO in April 2008. The company spent a year evaluating Skype and its potential within eBay’s portfolio before deciding that spinning off the company was the best choice.
Donahoe also installed a new management team at Skype led by Josh Silverman. That team has driven stronger momentum and improved performance. In 2008, Skype generated revenues of $551 million, up 44 percent from 2007, and segment margins of approximately 21 percent. Registered users reached 405 million by the end of 2008, up 47 percent from 2007, and user metrics improved significantly throughout the year. The company recently said it expects Skype to top $1 billion in revenue in 2011, nearly double 2008 revenues.
“Under the leadership of Josh Silverman and his management team, Skype has become a stronger business in the past year, and I expect it…