EBay plans initial offering for Skype unit

By Joseph Galante
Bloomberg News / April 15, 2009
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SAN FRANCISCO - EBay Inc., operator of the most-visited US e-commerce site, is planning an initial public offering for its Skype unit, which it bought in 2005 for $2.6 billion.

The IPO is slated for the first half of 2010, though the timing will depend on market conditions, the San Jose, Calif., company said yesterday in a statement. EBay wrote down the value of the acquisition to $1.2 billion in 2007.

Skype doesn't fit well with eBay's other businesses, chief executive John Donahoe said. The program, which lets people make calls and hold videoconferences online, accounts for about 6 percent of eBay sales. Donahoe has faced pressure from investors to focus on improving eBay's e-commerce site, where revenue is dropping.

"The numbers on the business have been phenomenal," said Paul Bard, an analyst with Renaissance Capital LLC in Greenwich, Conn. "I think there would be substantial investor interest."

The offering could raise $500 million to $1 billion for eBay, depending on how much equity eBay gives up, Bard said. Skype's market value could be $3 billion to $5 billion, he said.

EBay shares rose 54 cents to $14.92 after hours after closing at $14.38 yesterday on the Nasdaq Stock Market. The shares have climbed 3 percent this year.