Ebay just brought in a cold two billion dollars selling 65% of Skype at a 2.75 billion dollar valuation. This has been confirmed, and will coming to fruition in the fourth quarter of 2009. People are already getting their dander up over the deal, mostly ignoring that fact that Skype is in a spat with its original founders over the technology that makes it tick.
Om Malik, blogger extraordinare, has made a fair point that in deed, this could be a boondoggle. If in fact Ebay had been waiting to take Skype public, it might have been able to get a far higher price for the company. The 2.75 billion dollar valuation might have been a billion dollars low, perhaps. Of course, we cannot know for sure what the public market would have been willing to pay, but 2.75 billion does seem odd.
Skype, rumored to have revenues of 600 million yearly, would only need to clear 100 million in profits at a P/E ratio of 27.5 to be worth 2.75 billion, something that seems very feasible. Of course, if Skype is only marginally profitable, then perhaps the price makes sense. But, if Skype was a stable, profitable, and expanding enterprise, then it is hard to draw up a picture of the company in which to 2.75 billion dollar number does not seem low.
Earliar this year, the CEO Ebay pointed out that two billion was far too low a valuation for Skype. I agreed, once a company makes a profit, their valuation rises snappily up the scale. Unless someone decideds to leak current financial information for Skype, we are going to have to guess.
As a final note, one of the VC firms in the deal, Andreessen Horowitz, has a board seat on Ebay. They might have been in the deal merely to be moderators between Silver Lake and Ebay. Whatever happened, Ebay is letting Skype go, and the internet landscape just had an earthquake.
The press release can be found here.
