EBay In No Hurry to Spin Off Skype

Many observers had been waiting a long time for eBay Inc. (NASDAQ:EBAY) to announce a spinoff of its voice-over-Internet-protocol phone service unit Skype. After all, it was clear that the online auctioneer was having a tough time achieving the integration envisioned when it paid $2.6 billion for the company in 2005, and eBay execs had been hinting for months that they were considering various options for the unit.

So when eBay chief executive John Donahoe, citing "limited synergies," announced last month that the company would spin off Skype via an IPO in the first half of 2010, it really came as no surprise. But that appears to be a very soft deadline now.

Speaking Thursday morning at Sanford C. Bernstein's Strategic Decisions confab, Donahoe said that while the IPO's stated timing is still on track, a delay would likely only benefit eBay and Skype.

"Skype is now worth more than it was a year ago, and will be worth more a year from now than it currently is," wrote Bernstein analyst Jeffrey Lindsay in a Thursday research note. "The more Skype is worth, the more value eBay shareholders can realize from it."

Lindsay currently values Skype at $1.3 billion, which is roughly equal to 2 times its estimated 2009 revenue, but he added that the market could value it at as much as $2 billion.

Perhaps the leisurely attitude is a way to give potential buyers time to decide whether to acquire Skype. Some have suggested the unit might draw interest from Google Inc. (NASDAQ:GOOG), Microsoft Corp. (NASDAQ:MSFT) or Cisco Systems Inc. (NASDQ:CSCO).

Interestingly, Donahoe also seemed to leave the door slightly ajar for a potential spinoff of his company's online payments unit PayPal, an acquisition that has performed in quite the opposite fashion for eBay than the Skype deal. PayPal, which eBay acquired in 2002 for $1.5 billion, has been posting revenue growth that has outpaced that of e-commerce in general, Lindsay said, and "has a good runway to continue doing so."

While Donahoe said eBay has no current plans to spin out PayPal, he did say that the unit's synergies with its parent might not be permanent and that "management might one day be prepared to consider an independent PayPal," according to Lindsay.

We weren't there to hear Donahoe make this comment, but it seems a strange thing to say about an acquisition that has always made so much sense and is garnering so much success for its parent. - Olaf de Senerpont Domis

Comments

[Philip Cohen:]

Please Mr Intel, now that he has “proved” himself well enough for a directorship, please, please, please offer him a full-time executive position over at your company.

May 29 07:05 PM

[Tony P.:]

"Skype is now worth more than it was a year ago, and will be worth more a year from now than it currently is," wrote Bernstein analyst Jeffrey Lindsay in a Thursday research note. "The more Skype is worth, the more value eBay shareholders can realize from it."


The more it is worth, the more value it has. WOW. That's a real gem.

Exactly how does one garner "value" from a non-dividend paying stock? Oh, that's right.. find a phool and his money.

May 29 07:07 PM

[Philip Cohen:]

Quote: “Interestingly, Donahoe also seemed to leave the door slightly ajar for a potential spinoff of his company's online payments unit PayPal, …”

If that is correct that will be the first logical thought this guy has had; he otherwise clearly has no idea of what he is doing. If that MBA taught him anything he should be negotiating with “the banks” to take PayPal and integrate it into the banks’ online payments system, in exchange for an appropriate interest in the consolidated business, of course. Because, the more successful PayPal is, the more likely it is that the banks will finally get off their butts and introduce a like system; if and when that happens the banks are going to squash PayPal in about five minutes flat.

In the meantime, if he is good enough for a directorship at Intel, could not they offer him an executive position too? And then can we can find someone to put the pieces of eBay back together again and let us all (including the stockholders) get on with having some fun.

May 29 08:22 PM

[exodusfromebay:]

Frankly, any statement from JD is, to me, non-information.

This guy can't find his rear end with both hands and a flashlight.

I keep wondering how old he was when his brain injury occurred. Mule kick in the head at three, perhaps?

If brains was lard, he wouldn't grease to big of a pan.

Jun 02 01:59 PM

[Henrietta:]

Perhaps Donohoe is preparing for the unthinkable, scrutiny of the coercion of sellers to use PayPal, the monopolistic relationship between PayPal and eBay, and the apparent total lack of regulation of 'money exchangers' which enables consumer abuse on a scale long rendered illegal elsewhere in finance.

Is it beyond the bounds of reason to speculate that PayPal would become an instant spin-off at the first whiff of regulation?

Jun 02 11:02 PM