5 ms·

Maybe I've missed something, but what has changed in the two years since eBay spun off Skype at a valuation of < $3B to make it worth more than $7 billion today

by cfinke 15y ago

Maybe I've missed something, but what has changed in the two years since eBay spun off Skype at a valuation of < $3B to make it worth more than $7 billion today?

mgkimsal 15y ago
The value of the dollar's dropped. Not by that much, but it's certainly changed. That, and ebay never figured out how to monetize it. MS likely has some plans in place to aggressively make money from it. I'm a skype subscriber, and probably will continue to be one, assuming they keep at least the same level of support for Macs.
- cfinke 15y ago
  > The value of the dollar's dropped. Since the owners are almost all US-based (I think), fluctuation in the dollar against foreign markets shouldn't have much impact on Skype's pricing. Even so, the dollar's value against the Euro hasn't hardly changed at all: eBay announced their sale of Skype on September 1, when 1 USD = 0.7 EUR. Today. 1 USD = 0.6975 EUR.
  - mgkimsal 15y ago
    I guess the sarcasm didn't come through - forgot my smiley face. Too many talk radio commercials telling me to buy gold were behind that knee-jerk observation. I think the higher price is partially because MS may have a strong monetization plan in place and they don't want anyone else to get it.
  - prostoalex 15y ago
    > a group of technology investors including Silver Lake Partners, venture capital firms Index Ventures and Andreessen Horowitz, and the Canada Pension Plan Investment Board
    - pyre 15y ago
      Sept 1: 1 USD = 1.05 CAD Now: 1 USD = 0.96 CAD Not to mention that the valuation was done in US dollars, and the sale is being done in US dollars.
      - hessenwolf 15y ago
        Valuation currency does not make much difference. As an example, Ebay stock tends to fluctuate with the eur2usd rate.
  - forgottenpaswrd 15y ago
    "Since the owners are almost all US-based (I think), fluctuation in the dollar against foreign markets shouldn't have much impact on Skype's pricing." Is not fluctuations against foreign market, inflation is rampant, that means that is something has the same value,(a company) you need to pay more dollars for it. Dollar has gone down against commodities(sugar, rice, oil, gold, copper...) because FED is printing dollars like there is no tomorrow. Europe is doing the same for Euro(because if they do not Spain, Greece, Portugal and Ireland burn).
- HelloBeautiful 15y ago
  >> ebay never figured out how to monetize it Some ppl in and around ebay monetized the buying and the selling big big time.
meterplech 15y ago
The markets changed a lot. I don't know much about skype but I do think that's probably a huge part of this.
quickpost 15y ago
If this graph is to believed, it looks like they are on their way to doubling in size since then: http://skypenumerology.blogspot.com/2011/04/summer-recession-is-approaching.html http://skypenumerology.blogspot.com/2011/04/summer-recession...
staunch 15y ago
Rumors were that Facebook was going to buy it. Microsoft probably had to go up to $7 billion to top their offer.
hessenwolf 15y ago
Maybe this time MS bought the rights to read the frickin' code.
horatiumocian 15y ago
1) Skype has stronger growth than when it was owned by eBay 2) When it was spun off by eBay, Skype acquired the IP of their P2P technology from the founders. This makes it more attractive to suitors 3) Skype has filed for an IPO, which would give its valuation a premium These are the reasons that make Skype more valuable now than when it was spun off by eBay. If you add a bidding war between Facebook, Google and Microsoft, it explains the $7 billion valuation. However, I agree that $7B is too much for Skype, unless there are great synergies for the acquirer.
dspillett 15y ago
1. Since eBay sold its controlling stake (they still own an amount of equity in the business) the investors now in control have got the rights to the whole thing where eBay didn't actually buy the rights to some of the code off the founders - this makes quite a difference. 2. The western world is slowly pulling itself out of a recession right now, rather than two years ago when we were on the other side and already sliding down. This will help any good plan to monetise the service further if that is MS's goal (it is probably their secondary goal). 3. Social networking, while already the "big thing" two years ago has grown considerably and is a fertile battleground for the big names. Competing in this market is presumably MS's primary driver for the purchase. 4. Facebook were strongly rumoured to want Skype or something similar to integrate with its current offerings and Google already has Google Talk (though it only has a fraction of the market awareness of Skype). So for MS to compete in that area they would have two choices: put up a big enough offer for Skype to scupper anyone else (particularly facebook, because if they got it MS would be competing against two entrenched brands in the same beast) buying it, or make their own (or buy something else) and have to compete against the entrenched ubiquitous brand in the area (some people talk of making an Internet call as "skyping" someone). The valuation seems quite a bit high to my untrained eye, but MS buying Skype makes sense and perhaps that is simply the price they had to pay to get it. It isn't like MS is short of a bob or two.
- hessenwolf 15y ago
  Hold on - did Ebay just score a win with this?
  - gwern 15y ago
    Maybe; eBay paid $2.6b in ~2005 (OP says 3.1b, WP says $2.6b), and then sold off 70% of it for $2b (http://en.wikipedia.org/wiki/Skype#History http://en.wikipedia.org/wiki/Skype#History). OP doesn't seem to specify how much MS is buying, but let's assume 100%, so eBay is selling its 30% too; 30% of 8.5b is $2.55b, so eBay sold its 2 chunks for 2+2.55 or $4.55b. That represents a profit of 1.45 or 1.95b over 6 years or $320m a year. (If MS didn't buy eBay's share, then they are currently at a 0.6-1.1b loss on their Skype investment excluding whatever that 30% is worth.) Presumably eBay had better opportunities for 2-3b of capital.

by cfinke 15y ago

Maybe I've missed something, but what has changed in the two years since eBay spun off Skype at a valuation of < $3B to make it worth more than $7 billion today?

mgkimsal 15y ago

The value of the dollar's dropped. Not by that much, but it's certainly changed. That, and ebay never figured out how to monetize it. MS likely has some plans in place to aggressively make money from it. I'm a skype subscriber, and probably will continue to be one, assuming they keep at least the same level of support for Macs.

cfinke 15y ago
> The value of the dollar's dropped. Since the owners are almost all US-based (I think), fluctuation in the dollar against foreign markets shouldn't have much impact on Skype's pricing. Even so, the dollar's value against the Euro hasn't hardly changed at all: eBay announced their sale of Skype on September 1, when 1 USD = 0.7 EUR. Today. 1 USD = 0.6975 EUR.
- mgkimsal 15y ago
  I guess the sarcasm didn't come through - forgot my smiley face. Too many talk radio commercials telling me to buy gold were behind that knee-jerk observation. I think the higher price is partially because MS may have a strong monetization plan in place and they don't want anyone else to get it.
- prostoalex 15y ago
  > a group of technology investors including Silver Lake Partners, venture capital firms Index Ventures and Andreessen Horowitz, and the Canada Pension Plan Investment Board
  - pyre 15y ago
    Sept 1: 1 USD = 1.05 CAD Now: 1 USD = 0.96 CAD Not to mention that the valuation was done in US dollars, and the sale is being done in US dollars.
    - hessenwolf 15y ago
      Valuation currency does not make much difference. As an example, Ebay stock tends to fluctuate with the eur2usd rate.
- forgottenpaswrd 15y ago
  "Since the owners are almost all US-based (I think), fluctuation in the dollar against foreign markets shouldn't have much impact on Skype's pricing." Is not fluctuations against foreign market, inflation is rampant, that means that is something has the same value,(a company) you need to pay more dollars for it. Dollar has gone down against commodities(sugar, rice, oil, gold, copper...) because FED is printing dollars like there is no tomorrow. Europe is doing the same for Euro(because if they do not Spain, Greece, Portugal and Ireland burn).
HelloBeautiful 15y ago
>> ebay never figured out how to monetize it Some ppl in and around ebay monetized the buying and the selling big big time.

meterplech 15y ago

The markets changed a lot. I don't know much about skype but I do think that's probably a huge part of this.

quickpost 15y ago

If this graph is to believed, it looks like they are on their way to doubling in size since then: http://skypenumerology.blogspot.com/2011/04/summer-recession-is-approaching.html http://skypenumerology.blogspot.com/2011/04/summer-recession...

staunch 15y ago

Rumors were that Facebook was going to buy it. Microsoft probably had to go up to $7 billion to top their offer.

hessenwolf 15y ago

Maybe this time MS bought the rights to read the frickin' code.

horatiumocian 15y ago

1) Skype has stronger growth than when it was owned by eBay 2) When it was spun off by eBay, Skype acquired the IP of their P2P technology from the founders. This makes it more attractive to suitors 3) Skype has filed for an IPO, which would give its valuation a premium These are the reasons that make Skype more valuable now than when it was spun off by eBay. If you add a bidding war between Facebook, Google and Microsoft, it explains the $7 billion valuation. However, I agree that $7B is too much for Skype, unless there are great synergies for the acquirer.

dspillett 15y ago

1. Since eBay sold its controlling stake (they still own an amount of equity in the business) the investors now in control have got the rights to the whole thing where eBay didn't actually buy the rights to some of the code off the founders - this makes quite a difference. 2. The western world is slowly pulling itself out of a recession right now, rather than two years ago when we were on the other side and already sliding down. This will help any good plan to monetise the service further if that is MS's goal (it is probably their secondary goal). 3. Social networking, while already the "big thing" two years ago has grown considerably and is a fertile battleground for the big names. Competing in this market is presumably MS's primary driver for the purchase. 4. Facebook were strongly rumoured to want Skype or something similar to integrate with its current offerings and Google already has Google Talk (though it only has a fraction of the market awareness of Skype). So for MS to compete in that area they would have two choices: put up a big enough offer for Skype to scupper anyone else (particularly facebook, because if they got it MS would be competing against two entrenched brands in the same beast) buying it, or make their own (or buy something else) and have to compete against the entrenched ubiquitous brand in the area (some people talk of making an Internet call as "skyping" someone). The valuation seems quite a bit high to my untrained eye, but MS buying Skype makes sense and perhaps that is simply the price they had to pay to get it. It isn't like MS is short of a bob or two.

hessenwolf 15y ago
Hold on - did Ebay just score a win with this?
- gwern 15y ago
  Maybe; eBay paid $2.6b in ~2005 (OP says 3.1b, WP says $2.6b), and then sold off 70% of it for $2b (http://en.wikipedia.org/wiki/Skype#History http://en.wikipedia.org/wiki/Skype#History). OP doesn't seem to specify how much MS is buying, but let's assume 100%, so eBay is selling its 30% too; 30% of 8.5b is $2.55b, so eBay sold its 2 chunks for 2+2.55 or $4.55b. That represents a profit of 1.45 or 1.95b over 6 years or $320m a year. (If MS didn't buy eBay's share, then they are currently at a 0.6-1.1b loss on their Skype investment excluding whatever that 30% is worth.) Presumably eBay had better opportunities for 2-3b of capital.