Taking the first steps to unwind its awkward 2005 marriage, EBay Inc. said Tuesday that it planned to spin off Internet phone service Skype through an initial public offering in 2010.
The San Jose company said the divorce would allow it to focus on its core e-commerce business, which has struggled in the last year. It announced plans Monday to sell another acquisition, recommendation search engine StumbleUpon, back to its founders.
Skype, a software application, allows consumers to make domestic and international phone calls over the Internet. Calling another person on Skype is free, while using a landline or mobile phone costs cents per minutes, depending on the country.
EBay bought Skype for $2.6 billion despite investors' protests that the two companies didn't fit well together. Then-Chief Executive Meg Whitman said at the time that an Internet calling service would help buyers and sellers work out details of an auction, and that the service would be especially popular in countries such as India and China, where EBay was expanding.
By the end of 2008, Skype had 405 million users, up nearly 50% from 2007. It made $551 million in 2008, and EBay last month projected that Skype would be a billion-dollar company by 2011.
"Skype is a great stand-alone business with strong fundamentals and accelerating momentum," EBay President and CEO John Donahoe said in a statement.
But observers say Skype has been a distraction for management, and that EBay buyers and sellers prefer to communicate by e-mail.
"EBay has no synergies with Skype, and it's a big drain on management's time," said Jeffrey Lindsay, a senior analyst at Sanford C. Bernstein & Co.
Some Skype users weren't happy with the partnership either.
"I was sad when EBay took over," said Bjarne Winkler, a Napa businessman who uses Skype to keep in touch with family and friends in his homeland of Denmark. "The innovation definitely stopped, and it became commercialized."
Senior executives have conceded recently that EBay and Skype don't fit well together. In 2007, EBay said it would take a $900-million impairment write-down against the value of Skype, an admission that it had overpaid.
But until Tuesday, EBay hadn't revealed any formal plans to separate the two companies. News emerged last weekend that Skype's founders, Scandinavian entrepreneurs Niklas Zennstrom and Janus Friis, had tried to buy back the business but could not raise enough money.
