Washington — The duo founders who developed web telephony service Skype, and sold it to online auctioneer eBay Inc. in 2005 for billions that has yet to pay off, seem to have another trick up their sleeve: buying it back, according to media reports.
The two founders Niklas Zennstrom from Sweden, and Janus Friis from Denmark, created Skype in 2003 and two years later sold it to eBay for $2.6 billion, and later received bonus payouts that increased the final price to $3.1 billion, have approached various private equity firms and are culling up their own essential resources to make a bid for the Internet calling service, say several people with knowledge of their plans.
They both have also created a venture capital firm Atomico and backed the online video service Joost, both based in London, and are now planning to raise one billion dollars from private equity firms to re-claim their brainchild, the New York Times reported last week, citing several people familiar to the matter.
eBay would be looking to sell the phone service for at least 1.7 billion dollars, the daily reported, and Zennstrong and Friis are attempting to put together about $2 billion in financing, which may even include a note carried by eBay. But neither commented for the story, and it is not even clear if “they are actively engaged in negotiations with eBay.”
Skype, which supports more than 405 million registered users, up from 53 million when eBay acquired it, and the service had $145 million in revenue in the fourth quarter of 2008. Skype commands enormous global street credibility and is making effective moves to increase its already significant market penetration.
The fast-growing Skype, which lets fellow Skype customers call each other for free, with rates ranging a few pennies a minute for international calls to non-Skype users, was acquired by eBay after former Chief Executive Meg Whitman thought Skype could find an audience in eBay’s auction sellers and buyers. The low cost has aided the company gain 8 percent of the world’s international calling minutes, according to TeleGeography, a market research firm.
But despite its enormous growth in users, Skype has scarcely generated very little income for eBay. Revenue, which the Wall Street Journal has reported was $550 million last year (that is $1.35 per registered user), comes from such up-charges as the lease of a telephone number so non-Skype members can call you, a service called SkypeOut and voicemail-to-text conversion.
eBay’s current CEO John Donahoe has admitted that Skype has no synergies with its core e-commerce and payment business, which also owns Web payments service PayPal. In addition, Donahoe has said the company would do what was best for eBay and Skype, comments that some on Wall Street have taken as an interest in selling.
Zennstrom and Friis did not respond to requests for comment, and it is so far unclear whether the two are actively engaged in negotiations with eBay. But one person familiar with the nature of their discussions said they were trying to raise about $1 billion in equity from private investors, and were discussing one case in which eBay itself would put up the rest of the financing in the form of a seller’s note to complete a deal worth more than $2 billion.
An eBay spokesman, Alan Marks, said the company did not comment on rumors.
Analysts quoted as saying they believe that eBay is looking for a price of at least $1.7 billion, the value of Skype on its balance sheet after the company wrote off a portion of the acquisition in 2007.
Doing away with Skype would solve a number of problems for eBay, including generating cash for its United States operations. eBay had $3.19 billion in cash at the end of last year, but $2.8 billion of that money is overseas and would be subject to repatriation taxes if the company were to invest it in its ailing United States e-commerce marketplace, according to analysts.