Sold! eBay jettisons Skype in $2 billion deal

The Internet telephone service that eBay bought in 2005 will be sold to a group of private investors that includes Netscape founder Marc Andreessen.

E-commerce giant eBay announced Tuesday that it is selling its Skype unit to an investor group that includes Marc Andreessen's new venture.

Under the deal, eBay will receive approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million, for a total of $2.025 billion. The participants expect the deal to close in the fourth quarter.

The investor group, which will take a roughly 65 percent stake in Skype, is led by Silver Lake and includes Index Ventures, Andreessen Horowitz, and the Canada Pension Plan Investment Board. The remaining 35 percent of the Internet telephony service will be retained by eBay.

The parties said the deal values Skype, which is likely to see an IPO in the coming months, at $2.75 billion.

The sale of Skype had been expected for some time. Word of Tuesday's impending sale to the private investor group was first reported late Monday in The New York Times.

The Andreessen Horowitz venture capital group was launched in July by Marc Andreessen, the founder of Netscape and co-founder of Opsware, and Ben Horowitz, also co-founder of Opsware.

With the sale, eBay acknowledged that things hadn't worked out as planned with Skype, which it acquired for $2.6 billion in 2005 with the plans to offer customers the ability to discuss their transactions in real time. Over the course of the four years since then, eBay found that its acquisition failed to provide what it sought.

"Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments businesses," eBay President and CEO John Donahoe said in a statement Tuesday. "As a separate company, we believe that Skype will have the focus required to compete effectively in online voice and video communications and accelerate its growth momentum."

Lead investment firm Silver Lake echoed the forward-looking sentiments.

"This transaction benefits...will allow Skype the opportunity to accelerate the growth of its business by harnessing the deep technological and company development expertise that resides within the investor group," Egon Durban, managing director at Silver Lake, said in a statement.

In 2007, eBay said it would take a $900 million so-called impairment writedown against the value of Skype, meaning that eBay had been forced to reassess the value of the Internet telephony company relative to its overall business. By recording a charge, the company essentially announced it had taken a loss on its original investment.

When eBay announced Donahoe as its new CEO in 2008, he indicated that the company would take a year to evaluate the future of its online phone and video-conferencing service.

In April, eBay announced plans to spin off Skype , with an IPO in the first half of next year.

Along the way, reports had surfaced that Skype founders Niklas Zennstrom and Janus Friis were interested in repurchasing the company .

Clarification at 7:44 a.m. PDT: This story miscast the value of the deal. eBay gets approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million, for a total of about $2.025 billion. The companies say the deal values Skype at about $2.75 billion.

 

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