From Expat-Village.com
Ebay considers sale of Skype subsidiary
By
Apr 19, 2008, 08:00
Expat Village is edited and published by
Iain Williams in Caracas and Porlamar,Margarita Island, Venezuela.
A Financial Times story by Richard Waters in San Francisco at http://www.ft.com
Ebay will consider selling off its Skype internet phone subsidiary at the end of this year if it fails to find ways to use the fast-growing service to support its core e-commerce business, according to the company's chief executive.
The comments from John Donahoe, who took over at the end of last month, are the most direct indication yet that Ebay is thinking of scrapping the ill-starred acquisition. It paid $3.1bn, but wrote down the value of the business by $1.4bn last year after concluding it would not match earlier hopes.
Ebay originally believed that Skype would oil the wheels of its online markets by making communications easier between buyers and sellers, while also supporting new business models such as "click to call". Nearly three years after the acquisition, however, Ebay has yet to prove Skype can help its other businesses.
"What we're testing this year are the synergies," Mr Donahoe told the Financial Times this week after Ebay reported its latest earnings. "If the synergies are strong, we'll keep it in our portfolio. If not, we'll reassess it." That could lead to the disposal of the business, he indicated.
While the acquisition of Skype has widely come to be seen as a blunder for Ebay, the phone service itself has continued to grow fast, adding another 33m registered users in the first three months of this year to reach 309m. Although most use it for free internet phone calls, the addition of extra paid services helped Skype to increase its revenues to $126m in the first three months of this year, up 61 per cent from the year before.
"What we know is, Skype is a great stand-alone business," Ebay's CEO said. Its revenues this year are set to top $500m and the service will be profitable, he added.
Meanwhile, Mr Donahoe moved to silence suggestions that have started to circulate in Silicon Valley and on Wall Street that Ebay should also consider selling its PayPal division to boost its flagging share price.
With revenues running at an annualised $2.3bn and a growth rate of more than 30 per cent, the online payment service has enjoyed consistently higher growth than Ebay's core e-commerce operations and some bankers speculate it could be worth as much as $20bn as a standalone company, or almost half of Ebay's total stock market value. With much of its growth coming from handling payments that do not take place on Ebay, PayPal has less strategic reason to remain part of the group.
Mr Donahoe said there were still strong advantages to keeping PayPal in Ebay and that he expected to continue to own the payment service "for many years".
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Expat Village is edited and published by
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