SAN FRANCISCO — With its sale to private investors, the online calling service Skype has thrown off the last of the shackles that limited its growth and potential as a unit of eBay. Now its challenge is to turn its global popularity into bigger profits.
EBay announced on Tuesday that it was selling Skype to a group led by Silver Lake Partners, a private equity firm in Silicon Valley. As part of the deal, which values Skype at $2.75 billion, the buyers agreed to pay $1.9 billion in cash, which includes a loan from eBay of $125 million, for 65 percent of the company. EBay, which is based in San Jose, Calif., will retain a 35 percent stake.
Skype offers free software for computers and smartphones that lets people make free voice and video calls to other Skype users over the Internet. It makes money primarily by charging for calls to landlines and cellphones around the world, although its rates are generally far below those of traditional phone companies.
When it acquired Skype in 2005, eBay said it hoped the service would support its auctions and its PayPal payment service by letting buyers and sellers discuss transactions. But eBay users were not so chatty.
The deal announced Tuesday would essentially allow Skype to go back into start-up mode. For example, it will be able to conceal investments in projects and new technologies from the public — and from rivals — instead of disclosing them in eBay’s public regulatory filings.
The company will also be able to lure new employees with its own stock, which could become valuable if Skype’s buyers decide to sell shares in an initial public offering.
“This gives us a great set of investors who are going to add a lot of value to the business,” said Josh Silverman, Skype’s chief executive. “And as a stand-alone company we are focused solely on communications, and there is always benefit to focus.”
The group buying Skype includes the London venture capital firm Index Ventures and Andreessen Horowitz, a new venture capital firm co-founded by Marc Andreessen, the Netscape co-founder.
The deal completes a journey that began early last year, when Meg Whitman, eBay’s longtime chief executive, left the company and her deputy, John Donahoe, took over. Mr. Donahoe moved Mr. Silverman over from Shopping.com, another eBay division, and gave Skype, which is based in Luxembourg, wide latitude to operate independently.
“All the previous presidents had a really short leash back to San Jose, and the company was basically a bureaucratic mess,” said Phil Wolff, editor of Skype Journal, a blog covering the service. “With the changes last year, the company got a strong leadership team and a strong sense of direction.”
The result has been steady, solid growth, even as competing Internet calling services like Google Voice came on the scene. Skype, which had 276 million registered users in the first quarter of last year, ended July with 480 million.
Revenue rose to $170 million in the second quarter of this year from $136 million in the same quarter a year earlier. EBay does not break out Skype’s profits but says it has been profitable for 10 consecutive quarters.
In a sign that Skype may have discovered new opportunities outside the personal computer, the Skype application for the iPhone has been one of the most popular programs for the device since it was released in March. Skype has also struck deals to place its service on Nokia phones.
Egon Durban, managing director at Silver Lake Partners, said the iPhone application was “a great example of what we feel are the attractive opportunities for the company to develop.”
“This is one of the leading Internet franchises with terrific growth prospects,” Mr. Durban said. He gave no specifics on features Skype might offer, but said it was easy to imagine possibilities. He also said the buyers had no plans for a public offering.
Some of Skype’s newest features may suggest directions for the company. The latest version of its software, released this year, emphasizes face-to-face video chats. Skype now says that 34 percent of calls between Skype users include video, and such chats have become a popular way for people around the world to connect with one another.
In addition to working on allowing outside programmers to weave Skype’s features and infrastructure into their own programs or Web sites, the company is also working on replacing the service’s underlying peer-to-peer technology. That is partly out of legal necessity. The rights to that technology remain with Skype’s founders, Niklas Zennstrom and Janus Friis, who have sued eBay in a British court over some changes eBay made to it. That case is to go to trial next year.
For eBay, selling Skype — particularly at a valuation higher than many analysts had thought possible — offers partial redemption for a deal that many Internet analysts said was an awkward fit. EBay paid $2.6 billion for Skype, and performance incentives lifted the final price to $3.1 billion.
“The purchase was a serious mistake by Meg Whitman. It was an attempt to buy growth, which investors saw through instantly,” said Jeffrey Lindsay, an analyst at Sanford C. Bernstein. The new eBay management found ways for Skype to generate revenue, he said, “and now they sold it at a great price.”
Mr. Donahoe said eBay did not regret having bought Skype when company executives believed eBay was in a mortal struggle with Google, which was also pursuing the service. He said the spinoff would allow eBay to focus on its core e-commerce and online payment businesses and avoid extra distractions.
“We don’t regret having done this at all. We compete in a dynamic market, and you have to move quickly and take risks,” Mr. Donahoe said. “When we bought Skype we thought it had synergies with our other two businesses, and it turns out it did not. But it also turned out that it’s a great stand-alone business.” (source: Bradstone, NYT)
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