EBay In No Hurry to Spin Off Skype

May.28.09 | About: eBay Inc. (EBAY)
ebay-sign-125x100.jpgMany 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