eBay mulls Skype saleAuction site’s CEO says VoIP unit must show strong synergies to justify its place in eBay’s portfolio.
eBay this week said it may sell Skype at the end of the year if it fails to find the best way to position the Internet telephony business within its core operations.
“What we’re testing this year are the synergies… If the synergies are strong we’ll keep it in our portfolio. If not, we’ll reassess it,” eBay’s new CEO John Donahoe told the newspaper.
Donahoe hinted that this could lead to a sale of the business.
The online auction site’s $2.6 billion acquisition of Skype in 2005 was met at the time with some scepticism.
eBay justified the purchase, claiming Skype would make communication between buyers and sellers easier, however, scepticism turned into ignominy for eBay last October when it wrote down the value of the VoIP unit by $1.4 billion, after it failed to live up to expectations.
However, on Wednesday eBay reported that Skype’s first-quarter revenues rose 61% year-on-year to $126 million, with membership increasing by 33 million during the last three months bringing its total number of customers up to 309 million – more than any other user base in eBay’s portfolio.
The online auction site’s VoIP division also achieved 100 billion cumulative Skype-to-Skype minutes.
“What we know is, Skype is a great stand-alone business,” said Donahoe.
A great stand-alone business it may be, but the $126 million in revenue Skype generated in the first quarter is a small proportion of the $2.19 billion in revenues that eBay generated as a whole.
What’s more, Skype’s growth weighed on eBay’s first-quarter operating margin, which declined on year from to 32% from 33.6%.
“The decrease in operating margins was caused primarily by our faster growing lower-margin businesses, such as PayPal and Skype,” said eBay in a statement.
However, Donahoe said he expects Skype to turn a profit in 2008, with revenues topping $500 million.
Meanwhile Skype is also ramping up its push into the mobile space through its on-going work with 3 UK.
The operator said Tuesday that it plans to release an enhanced HSPA version of the co-branded Skypephone it launched in 2007 in the next two to three months.
