April 14, 2009 / 9:58 PM / 11 years ago

ANALYST VIEW: EBay says to sell Skype in IPO

SAN FRANCISCO (Reuters) - Ebay Inc said on Tuesday it would spin off its Skype Web telephone services unit through an initial public offering, cheering investors who had prodded the online giant to unload the fast-growing, low-revenue business and return cash to shareholders.

Share of eBay rose 4 percent after hours.

TODD RETHEMEIER, ANALYST, HUDSON SQUARE RESEARCH

“It all depends on what kind of valuation they put on the IPO,”

He said that Skype may be in a better position than rival voice Internet telephony provider Vonage, which saw its shares plummet after its IPO, because Skype’s service is different enough from traditional telecom rivals.

“It’s a much more international business... They have a more differentiated business than Vonage had... Vonage is trying to replace home phones in the US.”

Skype, whose biggest business is offering communications services on desktop computers, is also starting to operate on cell phones. But Rethemeier noted that its mobile business was still very small.

STEVE CLEMENT, ANALYST, PACIFIC CREST SECURITIES

Clement said it does not make sense to compare Skype and Vonage.

“Its different business models. You’re comparing apples to oranges... Vonage is targeting the at home business. It’s been more focused at going at the telco landline access business. Skype’s been more a way to make cheap international calls, not as a replacement.”

“Its a different animal,” he said.

GREGORY LUNDBERG, ANALYST, COMMRESEARCH

“The very first thing that I have to say is market conditions currently would not support an IPO of Skype in our opinion. 2010 will be equally questionable unless the business

completely changes course with the launch of the Blackberry and iPhone applications.

“Strategically something else might happen altogether. Skype is probably more supportable as a strategic partner. Ebay was not necessarily that company.

“It would not be a traditional telecom network owner because you would then have an application that cannibalizes your base.

“Right now there are on average 16 million people that use Skype at any given moment, a far smaller number than the ‘registered users’, which is anybody that’s ever signed up that has a Skype user name. That means looking at fourth quarter revenue... the average revenue per user is $3.

“Something would have to change dramatically with Blackberry and iPhone for Skype to be able to come public.

“The issue is the iPhone itself won’t change that user base because AT&T won’t let it run on its network, only when it has connection to a Wi-Fi hotspot. That same sort of control is being exercised in Europe by some carriers and that’s a major barrier to uptake.”

Reporting by Ritsuko Ando and Sinead Carew, editing by Peter Henderson

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