Now We Know: Skype Is Profitable
eBay has announced it will take Skype public via IPO in the first half of 2010. The implication for private equity? We now have proof that, at least in this case, the buyer/seller disconnect on pricing will not ease up through the recession, and M&A will remain down. What I mean is that eBay just thumbed its nose at the “masters of the universe,” who have been "raging bulls" -- proclaiming this discounted environment is the “best buying opportunity of their lives” for the past six months. Valuations may be low, but rather than settle, sellers will simply work around it. In eBay's case, this means announcing an IPO rather than negotiating with the company's former founders and four private equity firms. The best part of the IPO press release is the details. Quelling the debate over the company’s profitability, eBay tells us that Skype’s margins in 2008 were approximately 21%. Further: “In 2008, Skype generated revenues of $551 million, up 44 percent from 2007.” Can’t wait to find out what this prices at--if it's above the $2 billion eBay reportedly asked for, KKR, Providence, Warburg and Elevation may regret walking away.
