- The $3 Billion Question: Analysts Divided Over Skype's Valuation

Rory Maher
Wednesday, April 15, 2009; 9:07 AM

Now that eBay (NSDQ: EBAY) has announced it is taking Skype public, the big question is how much investors will pony up for shares in the calling service?and analysts are all over the map with their answers.

?Merill Lynch analyst Justin Post is by far the most bullish on Skype. Post says Skype is worth $2.2 billion today given his revenue forecasts?and that could grow to $3 billion by the time it goes public in 2010. But he also says that eBay may still be considering selling to private investors and may have floated the IPO plan as a bargaining chip for eBay.

?The most conservative is Jeffries & Company analyst Youssef Squali, who values Skype at a mere $1 billion. Squali's revenue and profit margin forecasts are less aggressive than those of the other analysts, but he does agree with his counterparts that shedding the Skype service will give eBay some needed cash and allow it to focus on what it does best?sell products.

?Thomas Wiesel analyst Christa Quarles digs a little deeper into the numbers, forecasting 2010 revenue and EBITDA of $786 million and $111 million, respectively, to derive a value of $1.7 billion for Skype (the same value eBay attributes to it on its books). Quarles says the spinoff confirms the acquisition didn't work for eBay but also highlights the continued growth of the Skype service; revenue has more than doubled every year since 2005, according to Quarles.

?Credit Suisse analyst Spencer Wang, meanwhile, values Skype at $1.85 billlion.

What can't be forecast is how investors will view internet companies in general when next year rolls around. Right now sentiment appears to be improving (eBay stock was up about 50% in the past six weeks), but if the economy takes another turn for the worse, that could, of course, negatively impact a Skype valuation even if the company's revenue and profit continue to growl.


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