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With eBay Inc.'s (NASDAQ:EBAY) announcement Tuesday afternoon that it was cutting loose its Internet calling service Skype, it seemed to quash reports that the unit's original founders were interested in teaming up with private equity firms to buy it back.
The Wall Street Journal Wednesday, citing people familiar with the matter, said the reported $2 billion offer put forth by Niklas Zennstrom and Janus Friis was too low for eBay's taste. Yet some predicted that Skype might still become an acquisition target. In a research note Wednesday, Merrill Lynch & Co. analyst Justin Post questions the timing of eBay's announcement, and wonders whether it's a way to trot out Skype for potential buyers. "Announcing a spinoff this far in advance strikes us as unusual unless management believes the possibility of an IPO could drive potential buyers to the table," Post writes. The most likely buyers, he says, would be Google Inc. (NASDAQ:GOOG), Microsoft Corp. (NASDAQ:MSFT) and Cisco Systems Inc. (NASDAQ:CSCO), though an estimated price tag of around $3 billion might be tough to justify for these companies. EBay plans to spin off Skype via an IPO in the first half of 2010. The online auctioneer paid $2.6 billion for Skype in 2005, but integrating the acquisition has not gone as planned. EBay took a $1.4 billion write-down on Skype in 2007. In a statement Tuesday, eBay chief executive John Donahoe says the unit has "limited synergies" with its parent. Post and other analysts Wednesday generally agreed with Donahoe and applauded his decision. In a note Wednesday, Bernstein Research analyst Jeffrey Lindsay argues that Skype weighed on eBay's stock price despite the company's core business value, drained management resources and accounted for disproportionate costs that will now be eliminated from its parent's income statement. "Overall, we believe the asset is more valuable outside the company than inside and eBay will potentially be able to use the money from the IPO for acquisitions related to its core business, stock buybacks, or both," Lindsay writes. The analyst applauds eBay's push to pare its business portfolio, citing its announcement earlier this week that it had sold recommendation engine StumbleUpon back to its founders. He also suggests that the company will continue to carve off noncore assets, including online ticket broker StubHub, which eBay acquired for about $310 million in 2007. - Olaf de Senerpont Domis
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