If you’ve been scratching your head and wondering why eBay
eBay just completed the spinout of voice and chat service Skype, receiving $2.05 billion in cash and IOU notes from a consortium of private investment firms. Since eBay is keeping a 30% stake in the operation and selling the other 70%, the full value of Skype works out to $2.75 billion.
That's a lower valuation than the $3.1 billion eBay paid to take Skype out of the private sector in the first place. Hardly the outcome any investor would like to see after four years of capital commitment, but it could also have been a lot worse. After all, many an investment has fared much less pleasantly across the backbreaking 2008 speed bump.
I believe that eBay could have gotten a better deal with just a little patience. Internet telephone services are coming into their own right about now. Look at Vonage Holdings
But no matter -- the deed is done, and Skype has largely passed out of eBay's control. When Skype returns to the open market in its own IPO, which is a common exit strategy for privateinvestor takeovers, I hope to see a market full of skepticism and ridiculously low share prices. That will be a happy day for my portfolio.
Until then, I'm not quite sure what eBay will use the Skype cash for, unless the company is planning a merger or takeover on a large scale. Mercadolibre
With about $5 billion of cash equivalents in the bank and hardly any debt, eBay sure could have kept sitting on its hands a while longer. It's not like the debtors are knocking on the door with angry demands of repayment. A little patience could have paid off handsomely in the long run, but it's too late to go back now.
How can eBay use two fresh billions, other than collecting dust and interest in a Swiss bank account? If you have any ideas, please share them in the comments below.