eBay Sells Skype Stake For Wash

Ebay bought 100% of Skype a ways back for $3.1B. Today, it sold 65% of the company to a group of investors for $1.9B. For those keeping score at home, that means ~0% gain on sale. Query: Given the current state of affairs, is that a huge coup for the faltering auction giant or a loss in disguise?

On the one hand, the service has grown to produce revenues of $550M/year. That means the purchase price represents a 6x valuation multiple (i.e. the whole company is worth 6 times yearly revenues) - not particularly high. Most analysts expect Skype's revenue to rise.

On the other hand, this is a very down economy. Despite Skype's allure, cash is hard to come by and risk is unsavory, making buyers wary and, therefore, cheap. More importantly, the company is being sued by a UK company for violation of a technology license. The technology, called Global Index, is essential to Skype's architecture and function. If they lose the license, they shut down. eBay has said as much in its filings. The two sides are scrambling to settle, and you can bet it won't be for a paltry sum. With these risks and the economy, is it impressive that eBay got even that much for the Company?

On the other, other hand, eBay will retain a 1/3 share of Skype - also a mixed signal. Is it that eBay still believes in Skype and wants the upside or is it a requirement of the new investors so that eBay retains some skin in the game in case it all goes south?

Hard to tell.