eBay could benefit from Skype IPO
Staring at the Skype logo on a blank screen
TEXT OF INTERVIEW
Steve Chiotakis: Of course communication is what Skype is all about. Today eBay says it plans to spin off its Internet service through an initial public offering. Our European Correspondent Stephen Beard joins us right now. All right Stephen, eBay took a lot of flack a few years ago for paying so much money for the then-Swedish-service Skype. Is this an admission of failure?
Stephen Beard: Well eBay acknowledged in 2007 that it had overpaid for Skype -- it wrote down its investment by more than half -- ouch! -- $1.4 billion it had lost. The company eBay admits now that Skype doesn't after all fit very well with the online auction business. The original plan was that people buying and selling on the site would talk to each other over Skype. That didn't pan out, and really eBay has spent the last three and a half years wondering what to do with its very expensive acquisition. So now with this IPO, it hopes to get some of its money back.
Chiotakis: So Stephen, what sort of shape is Skype in? Is eBay going to get its money back?
Beard: Skype seems to be in pretty good shape. It's now the world's largest single provider of cross-border calls, it has 405 million subscribers. Last year, profits were up 44 percent to $551 million, and the company expects to be making $1 billion by 2011. So maybe they will get their money back.
Chiotakis: Any possibility, then, that before the IPO someone might step in, maybe make an offer?
Beard: Well here's the thing: the two Scandinavians who founded Skype are reported to have been trying to put together a private equity deal to buy the company back. And these are unconfirmed reports, but it was suggested they were offering $2 billion. Now eBay seems to think they can get more from an IPO, although that market's flat at the moment, by next year it may have picked up. And analysts are saying this IPO might itself trigger a higher offer from the Scandinavians or even an offer from the likes of Microsoft or Google.
Chiotakis: Mmm. Stephen Beard joining us from London. Stephen, thank you.
Beard: OK, Steve.