eBay to spin off Skype next year


June 18, 2010 Updated Apr 14, 2009 at 7:31 PM EDT

Online auction giant eBay announced plans on Tuesday to spin off Web communications service Skype with an initial public offering next year, ending the troubled relationship between the two firms.

The San Jose, California-based eBay, in a statement, said it expected the IPO for Skype to be completed in the first half of 2010. It said the specific timing would depend on market conditions.

"Skype is a great stand-alone business with strong fundamentals and accelerating momentum," eBay president and chief executive John Donahoe said.

"But it's clear that Skype has limited synergies with eBay and PayPal," he said. "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," he said.

eBay purchased Skype in 2005 for 2.6 billion dollars from Web entrepreneurs Niklas Zennstrom of Sweden and Janus Friis of Denmark, who founded the company in 2003.

But eBay found it difficult to integrate the company with its core auction business, and The New York Times reported last week that Zennstrom and Friis were seeking to buy the company back.

eBay did not set a target for the IPO but the market for public offerings has collapsed over the past year.

Current Media, a cable television firm co-founded by former vice president Al Gore, informed the Securities and Exchange Commission on Friday that it was shelving plans for a 100-million-dollar initial public offering.

Since the sale to eBay, the number of registered Skype users has exploded from 53 million to 405 million.

It generated revenue of 551 million dollars last year, up 44 percent from 2007, and expects to top one billion dollars in revenue in 2011.

Skype, which has its headquarters in Luxembourg, bypasses the standard telephone network by channeling voice and video calls over the Internet.

Its service features include being able to call other users free of charge and the ability to connect with land lines or mobile devices at low rates.

Skype also recently enabled Apple iPhone owners to use its service through a free software application. More than two million people have downloaded Skype for the iPhone, according to eBay.

eBay's announcement that it was spinning off Skype came one day after it parted ways with another purchase, StumbleUpon, an Internet startup bought two years ago for 75 million dollars.

eBay's share price gained 3.76 percent to 14.92 dollars in after-hours trading in New York following the announcement of the move to spin off Skype.

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