By BRAD STONE
Published: April 10, 2009
SAN FRANCISCO — The European duo who created Skype and sold it to eBay for billions may have another trick up their sleeve: buying it back.
Niklas Zennstrom and Janus Friis, the founders of Skype, have approached several private equity firms and are pooling their own substantial resources to make a bid for the Internet calling service, say several people with knowledge of their plans.
The two men sold Skype to eBay in 2005 for $2.6 billion, and later received bonus payouts that increased the final price to $3.1 billion. Since then, Mr. Zennstrom, a native of Sweden, and Mr. Friis, of Denmark, have created the venture capital firm Atomico and backed the online video service Joost, both based in London.
Skype has more than 405 million registered users, up from 53 million when eBay bought it, and the service had $145 million in revenue in the fourth quarter of 2008. Calls are free between Skype users, and rates are a few pennies a minute for international calls to non-Skype users; the low cost has helped the company gain 8 percent of the world’s international calling minutes, according to TeleGeography, a market research firm.
Skype also currently has one of the most popular applications for Apple’s iPhone, and has said it is developing software for the BlackBerry, which is expected in May.
EBay has admitted, however, that Skype has few synergies with its core e-commerce and payments businesses. In addition, John J. Donahoe, eBay’s chief executive, has repeatedly signaled his willingness to sell Skype for the right price.
Mr. Zennstrom and Mr. Friis did not respond to requests for comment, and it is unclear at this point if they are actively engaged in negotiations with eBay. But one person with knowledge of their discussions said they were trying to raise about $1 billion in equity from private investors, and were discussing one case in which eBay itself would put up the rest of the financing in the form of a seller’s note to complete a deal worth more than $2 billion.
An eBay spokesman, Alan Marks, said the company did not comment on rumors.
Analysts say they believe that eBay is looking for a price of at least $1.7 billion, the value of Skype on its balance sheet after the company wrote off a portion of the acquisition in 2007.
While there has been market speculation recently that eBay would sell Skype to another large corporation, it is unclear if anyone else is interested. Google was a losing bidder for Skype in 2005, but has since developed its own Internet-based calling service, Google Voice.
One crucial factor that might scare off other potential buyers is a brewing intellectual property dispute between eBay and the Skype founders. In a regulatory filing April 1, eBay disclosed that Joltid, a company founded by Mr. Zennstrom and Mr. Friis, had terminated eBay’s license to Joltid’s peer-to-peer technologies, which are at the heart of Skype’s calling service.
EBay said in the filing that it was asking a British court to rule that it was not in breach of the agreement, but the matter is unlikely to be resolved by the end of the year. Without a settlement or other resolution, the dispute is likely to dissuade anyone other than Mr. Zennstrom and Mr. Friis from considering an acquisition of Skype.
Selling Skype would solve a number of problems for eBay, including generating cash for its United States operations. EBay had $3.19 billion in cash at the end of last year, but $2.8 billion of that money is overseas and would be subject to repatriation taxes if the company were to invest it in its ailing United States e-commerce marketplace, according to analysts.
So, lemme see. I found Skype, sell it for over $3 billion and I want to buy it back? I'm an idiot.
Sell it for $3 with knowledge of a secure and profitable investment. Turn that $3 into $3.5, maybe $4. Ebay turned up the membership from about 50 million to about 250 million, but doesn't understand how to make money off of it. You buy back a company for the same or less than what you sold it for, you made a couple billion in the mean time, and the membership is up 4 fold. Seems like a solid game plan to me.