- The Washington Times - Tuesday, April 14, 2009

NEW YORK (AP) - EBay Inc. plans to spin off its Internet communications service Skype through an initial public offering.

San Jose, Calif.-based eBay said Tuesday it expects to complete the IPO in the first half of next year, though it said the timing will be based on market conditions.

EBay bought Skype for $2.6 billion in October 2005, hoping that buyers and sellers on its online marketplace would use it to communicate. That didn’t catch on, and eBay took a major writedown on the business in 2007, essentially acknowledging it had drastically overvalued it.

When John Donahoe replaced Meg Whitman as chief executive in April 2008, eBay said it would take a year to evaluate Skype and its role in the company.

In a statement Tuesday, Donahoe said it’s clear Skype has “limited synergies” with eBay and its payment service, PayPal.

This echoes comments he made during a day of analyst briefings in March, when he said that while eBay previously thought Skype would fit in, “in the fast-moving Internet world it’s turning out not to.”

At that time, he wouldn’t say whether eBay would eventually unload the unit, saying only that the company would “do what will allow Skype to maximize its success.”

EBay spokesman Alan Marks said that Skype’s management, including president Josh Silverman, is expected to stay in place. Silverman took his post in early 2008, replacing interim head Michael van Swaaij, who had himself taken over for Skype co-founder and head Niklas Zennstrom after Zennstrom left in October 2007.

Lazard Capital Markets analyst Colin Sebastian called the plan to spin off Skype a “good move.”

“They’re trying to be more friendly to buyers and sellers,” he said. “They’re investing more in technology and then divesting of noncore assets. It’s all consistent with their effort to produce a long-term turnaround.”

The announcement comes a day after two founders of Web content recommendation service StumbleUpon said they had bought the company back from eBay, which had purchased it two years ago for $75 million.

EBay shares rose 56 cents, or 3.9 percent in after-hours trading, after finishing regular trading down 25 cents at $14.38.

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