eBay to Offload Skype Brand?
Analysts Believe Rumours Subsidiary is to be Sold Has Ring of Truth
Feb 1, 2009 Christopher Wilson
The speculation was occasioned after eBay’s CEO, John Donahue, conceded to shareholders that “the synergies between Skype and the other parts of our portfolio are minimal.” His words were construed by analysts as an invitation to would-be buyers to place their bids.
eBay has long been understood to be struggling to marry its acquisition – purchased in 2006 for 2.6 billion – to its current business model. The apparent uncongeniality of the two businesses together with eBay’s belief that it paid well over the odds for the company have meant that it has grown increasingly discontented with the partnership.
Skype's Estonian Entrepreneurs
The brainchild of a pair of Estonian Internet entrepreneurs - Niklas Zennström and Janus Friis - and their team of technology wonks, Skype allows users with a broadband Internet connection to make peer-to-peer (computer-to-computer) video and telephone calls.
The propagation of web-cam technologies and the rise in the number of broadband Internet subscriptions has meant that it has become the de facto standard for users of Internet telephony. The system is attractive because it allows users to make free of charge peer-to-peer (computer-to-computer) calls while allowing computer-to-telephone calls to be placed at prices that substantially undercut the traditional telephony system.
Google and AT&T: Competing Skype Bids
Should eBay begin in earnest to seek a buyer it won’t find a lack of interest. Analysts believe two American business behemoths – Google and the telecommunications company AT&T – have subsidiaries that could easily integrate the product portfolio Skype brings to the table.
Indeed, despite its parent company’s apparent readiness to sell the subsidiary, the Skype brand continues to experience a boom. Fourth quarter revenues were reported to have risen by 26 percent and subscribers are believed to number 405 million worldwide – a figure that is known to grow by 30 million each quarter.
Skype and eBay: Strange Bedfellows
Conversely, eBay’s star is on the wane. The economic downturn of last year hit the company’s fourth quarter profits, a period –especially the festive season – that has traditionally proven profitable. However, last year saw the company report revenues of $2.04 billion, a figure that represents a 7 percent downturn from the year previous.
A substantial amount of the loss was ascribed to its main business, the eBay auction site, which suffered a 16 percent loss over the final months of last year.
Diverging Fortunes
With the two company’s futures expected to diverge further in the coming year, Jack Murphy, an analyst at the investment bank William Blair, was encouraged by Donahue’s words. They suggested to him that the company intends to retrench and focus on the business that made its name: “It’s important that eBay has opened the door to a buyer by talking about Skype as a stand-alone business. It would be best for eBay to get whatever cash they could for it and focus on their struggling core marketplace business.”
William Blair was talking to the London Times newspaper.
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