Meg Whitrman, as chief executive of eBay, bought Skype six years ago with big plans in mind.The conventional thinking goes that Meg Whitman, eBay’s former chief executive, blundered by buying Skype six years ago for $2.5 billion.
Her idea that Skype, the Internet calling service, would encourage eBay’s users to talk to one another rather than chat by e-mail never panned out. EBay ultimately acknowledged its mistake and cut its losses by selling a 65 percent stake in Skype to investors.
But eBay redeemed itself in the wake of Microsoft’s $8.5 billion agreement to acquire Skype on Tuesday. Long ridiculed for buying Skype, eBay will, in the end, likely profit from the deal to the tune of several hundred million dollars.
The payoff, at least by eBay standards, is sizable, although not huge. But eBay executives, who did not respond to a request for comment, will no doubt be happy to crow about the final accounting after years of criticism by the media and investors.
“It’s somewhere between saving a bogey and saving par,” said Jordan Rohan, an analyst with Stifel, Nicolaus & Company.
“The good news is that Skype flourished under independent ownership,” he continued. “It obviously isn’t as great an outcome if eBay had retained a larger percentage.”
EBay originally spent $2.5 billion in cash on Skype plus another $500 million later on in payouts to Skype’s founders. That is a total cost of $3.1 billion.
It sold the 65 percent stake in Skype two years ago for around $1.8 billion to investors including Silver Lake Partners and Andreessen Horowitz.
The remaining stake, as valued in the Microsoft deal, is worth about $2.4 billion before taxes and taking into account Skype’s debt. EBay therefore got more than $4 billion for Skype along the way.
But eBay will have to pay taxes on the money it collects from the sale. How much depends in part on the amount it repatriates from overseas, although it clear that eBay’s profit will be at least $800 million or so.
Not bad for a failed acquisition.