In what must be eBay’s biggest ever sale it looks like the online auctioneer has got out of jail free with Skype which it sold yesterday to a consortium of private investors. The deal valued Skype at $2.75 billion. eBay gets $1.9 billion cash, a $125 million note and retains a 35% stake in the company.
It wasn’t long after eBay originally paid around $3 billion for Skype that the strategic value of the investment was being questioned. This eventually appeared to be acknowledged by the company with a $900 million write-off. This latest deal will likely now show as a profit on the eBay’s books and considering the hit that markets have had over the last year must be considered to be a serious result.
Skype turned over $551million in 2008 and says it will hit sales of $1Bn by 2011. Other VoIP service providers will be interested in the valuation. Assuming an even growth between now and 2011 this suggests that it will do around $700 million in 2009 which represents a multiplier of 4.14 times sales.
Skype still very much has issues that will need sorting out. It is currently facing a legal battle with its original founders Niklas Zennstrom and Janus Friis over the rights to use the Intellectual Property that underpins the whole service.
The only real option the company has is to strike a deal to continue to have access to the technology. The alternative would be a wholesale change to SIP which would involve a huge global investment and a logistical nightmare when it came to the switchover.
Nevertheless Skype does now look to be a better bet than other high profile VoIP plays such as Vonage who also became embroiled in patent litigation and ended up paying a fortune to wriggle free.