eBay Finds Buyer for Skype

Investment group to pay $1.9 billion

by Auctiva.com staff writer
- Sep 01, 2009

A group of private investors has agreed to pay eBay $1.9 billion in cash for 65 percent of Skype, in a deal that values the Internet phone service provider at $2.75 billion.

The investor group, lead by Silver Lake Partners, a technology-focused private equity firm, will also get a $125 million loan from eBay to acquire Skype. eBay will retain 35 percent of the shares in Skype, which is expected to make $600 million this year.

"This is a great deal, unlocking both immediate and long-term value for eBay and tremendous potential for Skype," notes John Donahoe, eBay's CEO. "We've acted decisively on a deal that delivers a high valuation, gives us significant cash up-front and lets us retain a meaningful minority stake with talented partners."

The New York Times reports that eBay had been in talks with Google about a possible deal for Skype, but Google pulled back out of concern regarding Skype's ongoing legal battle with its founders, who still own part of Skype's software.

Silver Lake's Managing Director Egon Durban says the sale will benefit all parties involved. He called Skype an "innovative, next-generation company."

"[The acquisition] will allow Skype the opportunity to accelerate the growth of its business by harnessing the deep technological and company development expertise that resides within the investor group," Durban notes.

eBay bought Skype in 2005 for $2.6 billion. While the service remains popular—it accounted for 8 percent of international calling traffic in 2008 and has more than 405 million users—eBay announced in April it would spin off the company. According to reports, eBay's former CEO Meg Whitman hoped to use the service to allow buyers and sellers to communicate more easily.

"Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments businesses," Donahoe asserts. "As a separate company, we believe that Skype will have the focus required to compete effectively in online voice and video communications and accelerate its growth momentum.

"Selling Skype now at this great valuation, while retaining an equity stake, makes sense for the company. And it allows us to focus all of our energies on the opportunities in front of PayPal and eBay," he adds.

About the Author

Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.

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