eBay To Jettison Skype, IPO Rather Than Sale (EBAY)

eBay Inc. (NASDAQ: EBAY) is finally going to jettison its Skype VoIP service.  That is the good news.  The bad news is that this is not the separation we were looking for.  eBay is going to unload the company beginning with an initial public offering.  That sounds great, except that this won’t be expected to be completed until the first half of 2010.  It also noted the timing would be subject to market conditions, so there is no way to know what it is thinking about the strategy.

Skype generated 2008 revenue of $551 million, up 44% from 2007, and segment margins of approximately 21%. Registered users reached 405 million by the end of 2008, a gain of 47% from 2007. The company’s recent goals were for Skype to roughly double and to top $1 billion in revenue in 2011.

The big deal was supposed to be a sale-back to founders of Skype, but there were issues.  eBay would have had to take a substantial loss or it just was not going to get the price it wanted.

No terms for the IPO nor how it would affect shareholders were listed.  eBay stock is up 4% at $15.01 in after-hours trading.  Unfortunately, that is after a 1.7% drop today, and its 52-week trading range is $9.91 to $32.67.

This feels almost the same as the analogy of good news and bad news about about the food.  Nothing but horse manure to eat, but there is lots of it.  Our take here is that if eBay couldn’t work out a deal because it wants more than what the market has said Skype is worth.

JON C. OGG