Rumors and Buzz Put Skype on the Block

Analysts think comments from Ebay's CEO indicate the company might be ready to place its VoIP property on the auction block.

By Judy Mottl | Posted Jan 30, 2009
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UPDATED: John Donahoe, eBay's CEO, started the buzz about a possible sale of its Skype VoIP division a week ago during an earnings discussion when he didn't quite endorse the "synergies" between Skype and other divisions.

Now, rumors of a possible sale live on, fanned by analysts and bloggers opining whether a cash-crunched eBay has put Skype on the block and if Google might be bidding.

The auction giant said fourth-quarter profit fell by 31 percent from the same period a year ago and announced its first year-to-year drop in revenue.

During a discussion with analysts on the Jan. 21 earnings call, Donahoe stated twice that Skype is a great standalone business that has minimum synergies with eBay.

His statement was in response to a question from Stifel Nicolaus analyst Scott Devitt about eBay's plans for creating shareholder value with Skype.

"I said from the beginning, I think I said it a year ago, Skype is a great standalone business and that I was uncertain of the synergies between Skype and the other parts of our portfolio, "said Donahue.

"I think we are now confident that the synergies between Skype and the other parts of our portfolio are minimal," said Donahoe.

"So, we are going to continue to run and operate the business. It's not a distraction currently and at such time when we have further announcement to that, we'll let you know, but for now, we are very pleased with the momentum of the business and it's not a distraction."

Blogger Henry Blodget declared that eBay has "quietly" put Skype up for sale but didn't offer any sourcing.

The Google acquisition buzz isn't all that new. Chatter over whether Google would buy Skype popped up in April of 2008, after a turn as rumor mill fodder in 2007. The main point on both buzz-o-ramas: Google and Skype have synergies that might blend well.

Google wants to be a major wireless player. A VoIP service could easily be integrated with Gchat, its beta GrandCentral service and its mobile Android platform that gave birth to the G1 smartphone last year. GrandCentral is a Web-based voice communications platform Google acquired that lets users manage multiple phone accounts in one place.

The Skype division posted total revenue of $145 million in the fourth quarter of 2008, an increase of 26 percent year-over-year, according to eBay. It added 35 million new users in the quarter and its total subscriber base stands at 405 million, a 47 percent jump over the same time in 2007.

EBay also said Skype's sale of SkypeOut minutes for users to make calls to any phone -- landline, cellular or PC-to-PC, grew by 61 percent annually.

So why would eBay want to part with a cash generator like Skype? The main reason could be that growth at Skype, although still strong, is showing signs of slowing, the same thing eBay itself wants to avoid.

No one from Skype, eBay or Google responded to requests for comment.

Corrects prior version to clarify that bloggers are claiming that eBay has put Skype up for sale.

Article courtesy of InternetNews.com

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