Net phone giant Skype announces plan to go public

Aug 09 2010

Net phone giant Skype announces plan to go public

Skype – the company that got popular by letting people make calls over the Internet for free – is looking to cash in.

The provider of Internet telephone services plans to raise up to $100 million in an initial public offering.

The move is seen as a bid by Skype’s private equity firm owners, who purchased the Luxembourg-based company in November, to recoup some of their investment of more than $2 billion.

The IPO effort also could mean Skype’s owners want to entice other technology or telecom companies into a deal.

Skype provides free online video and text conversations that are popular with users such as college students who are studying abroad.

The company has drawn a large number of customers by offering free computer-to-computer services. A small percentage of its customers use Skype to make calls to traditional phones at discounted rates.

Skype shares are expected to trade on Nasdaq. The company did not specify the number of shares it would sell or give an expected price range.

Atlantic Equities analyst Chris Watts said Skype’s owners may see an IPO filing as a way to publicize the company in the hope that a strategic investor buys it outright.

Watts said that while Skype’s growth has been impressive, investors eying publicly traded shares should be cautious about its prospects for revenue growth.

“That’s the strongest point they have but it’s also their problem,” Watts said. “It’s a very, very difficult business to value. The issue for most people is going to be: yes, they’ve got a very substantial subscriber base but a lot of their subscribers just aren’t generating a lot of revenue.”

The fate of Skype’s Internet telephony rival Vonage Holdings also could scare investors.

Vonage shares plummeted after their $17 per-share May 2006 IPO and closed on Monday at $2.36.

Skype was founded in 2003 and acquired by eBay in 2005.

Last November, eBay sold a 70% stake in the company to a group of investors including Silver Lake, Canada Pension Plan Investment Board and Andreessen Horowitz.

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