Why Did eBay Sell Skype?

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EBay sold Skype to private investors today for $2.75 billion -- less than it paid to acquire the online phone service company three years ago. What prompted the sale, and was it a good move for either company?


EBay failed to integrate Skype into the company's mission. EBay bought Skype hoping to take advantage of its promise of online phone service and its innovative P2P -- peer-to-peer -- technology. Think of the music downloading model popularized by Napster and Kazaa, in which clients interact without the use of a central server, so that information travels directly to and from "nodes," or users. Skype added a communications level on top of an existing P2P technology called Global Index. That allows the company to provide service to millions of users without having to build and host a centralized server.

Om Malik says eBay shareholders should be furious about the sale:

First they paid top dollar for Skype back in 2005, making billionaires out of Niklas Zennstrom and Janus Friis. And, now instead of waiting for an opportune time to go public, eBay management is selling low, at a time when the only buyers are bargain hunters.

Business Insider says the exact opposite:

(The deal) gives eBay a 35% stake in a growing, (likely) profitable company, without the hassle of running it, which benefits eBay in the long-term.

Either way, tech writers seem pretty united around the idea that the deal is good for Skype. EBay clearly had little reason to be in the telecommunications business, and Skype's new owners are finally their own bosses, with every incentive to drive the company's valuation through the roof before an inevitable IPO (or new sale). Now that Skype is once again an independent company, we should probably expect an IPO when the market turns up. Om Malik expects an offering sometime next year. Skype is on pace to make $600 million in revenue in 2009.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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