eBay management is planning to sell Skype in an IPO next year. Estimates of its “value” run as high as $3 billion. Some think that a mainstream telecom company may buy it before the IPO. Trust me, if you ever get a chance to sell a money-losing business for billions, do it! I have nothing against Skype, but my capitalist heart swells with pride at the thought of another $2 to $3 billion in net cash on eBay's balance sheet. And without Skype, eBay’s earnings look even better. eBay is essentially subtracting a negative.in my post entitled "Short Amazon, Long Ebay"
Well, Skype never made it to the IPO. Today, eBay announced the sale of Skype (sortuv) to a private equity group led by Silver Lake Partners. eBay gets $1.9 billion in cash and a $125 million note, while maintaining a 35% stake.
Why didn't eBay sell it all? I don't know. They are incapable of cutting the cord and I am somewhat annoyed. What is the hold Skype has over people? It certainly isn't the fundamentals! Revenue growth is Skype's only draw, but does it make enough (or any) money to justify a $3 billion price tag? No.
Reminds me of the Internet bubble days of old... it's the "just you wait" phenomenon. Will Skype's gilded future ever come? I doubt it. So I'm glad Ebay gets $2 billion for what I think is a grossly overvalued asset, but I'm left unsatisfied.
With a 70% gain in eBay since my purchase in January, this one may be getting long in the tooth. Southeastern Asset Management (Longleaf) and other value guys bailed out long ago. That said, adjusting for $3.5 billion in cash (and the latest $2 billion infusion), eBay still isn't expensive. The free cash flow multiple is barely 12 by my calculations. And there isn't a prettier balance sheet around.