eBay to spin off Skype by mid-2010

CEO Donahoe cites "limited synergies" between the two companies

EBay announced today that it is planning to spin off Skype, despite the fact that the Internet phone company’s revenues are expected to top $1 billion in 2011.

EBay announced today that it is planning to spin off Skype, despite the fact that the Internet phone company's revenues are expected to top $1 billion in 2011.

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Specifically, eBay is planning to make an initial public offering for the company that it hopes to complete by mid-2010. EBay CEO John Donahoe today said that Skype was “a great stand-alone business” but that it had “limited synergies” with eBay. Because of this, Donahoe said that Skype would be better off as its own publicly traded company rather than as a subsidiary of eBay.

As a VoIP phone service that bills itself as a cheaper alternative to traditional telephone carriers, Skype has attracted more than 400 million users and has generated revenues of $551 million over the past year. EBay has said that it projects the company will nearly double its revenues over the next three years.

Skype had been aggressively expanding its business model in the weeks prior to today’s eBay announcement, as the company said last month that it was developing an enterprise service that would allow business users to connect Skype with corporate IP PBXs. Additionally, the company has developed applications for the iPhone and the BlackBerry, which are intended to give smartphone users low-cost voice alternatives to traditional cellular networks.

EBay purchased Skype in the fall of 2005 for $2.6 billion. At the time of the purchase, some analysts were already raising questions over whether an Internet phone company and an online auction house had congruent business models that would allow both companies to thrive in tandem.

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