EBay - Not Hyped on Skype

Buy low, sell high. Simple, right?

Well, in the deal EBay struck with investors to sell their Internet phone unit, Skype, it looks as though EBay is just relieved to be walking away with a recoup (well almost) of its initial investment.

EBay initially purchase the Internet phone company in 2005 to the tune of 3.1 billion to facilitate an easier communication forum for buyer and sellers on its online auction site. Unfortunately, it never worked out that way. The two forum could not successfully mesh and Skype, while a burgeoning company in itself, limited options for the Fortune 500 giant and negatively affected its bottom line.

Today, EBay has announced the sale of the Skype division to venture capital firms, Silver Lake Partners, Index Venture, Andreessen Horowitz and Canada Pension Plan Investment Board for a slight loss at 2.75 billion. The purchase is comprised of a cash component of 1.9 billion, a bond of $125 million and a roughly 35% equity investment in Skype.

But the inability of Skype to synergize with EBay seems to be no fault of its own. Skype reported an aggressively growing client base of 480 million users as of the end of the second quarter and an estimated $323 million in income thus far in 2009.

So while EBay is taking a “slight loss” on the sale of Skype, the sale will increase EBay’s value and the equity stake in Skype may prove to be a far more profitable and effective ownership for the EBay.