EBay plans to spin off Skype

EBay plans to spin off Skype

The online auction company says it will split off its Internet telephone service through an initial public offering in 2010.

NEW YORK (CNNMoney.com) -- EBay Inc. said Tuesday it plans to split off Skype, the Internet telephone service, through an initial public offering to be completed in the first half of 2010.

Letting Skype operate independently will allow it to better compete in online voice and video-messaging, and let eBay focus on e-commerce, according to eBay chief John Donahoe.

"Skype is a great stand-alone business with strong fundamentals and accelerating momentum, but it's clear that Skype has limited synergies with eBay and PayPal (eBay's online payment service)," Donahoe said in a statement.

eBay had hoped to use Skype to facilitate communication between auction buyers and sellers when it purchased the business in 2005 for a current total of $3.1 billion, according to Colin Sebastian, analyst with Lazard Capital Markets.

"The synergies they had hoped to achieve have not materialized," he said, and a spinoff makes sense since "eBay is fighting hard to turn around its core business."

Donahoe has been evaluating ways to integrate Skype services since taking the helm at eBay in 2008, the company said.

Skype had 405 million users by the end of 2008, and brought in $551 million last year, eBay (EBAY, Fortune 500) said. The business is on track to break $1 billion in revenue by 2011, the company estimated.

CNN