>Skype files for IPO on NASDAQ

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Skype, which last year became the largest carrier of international calls, has continued to grow briskly. In the year from June 30, 2009 to June 30, 2010, the company grew in registered users from 397m to 560m. During this time, users made 95bn minutes of voice and video calls

Skype starts process for public listing

By David Gelles in San Francisco
Published: August 9 2010 15:19 | Last updated: August 9 2010 16:20
Skype plans to raise up to $100m in an initial public offering, a move that would complete a dramatic journey for the company that less than a year ago was a subsidiary of Ebay.
Shares will be listed on the Nasdaq later this year according to a filing with the Securities and Exchange Commission
Ebay sold Skype to a group of investors last September after a series of contentious legal disputes between Skype’s management, its founders and Ebay. In the end, Ebay received $1.9bn for the company and retained a minority stake, short of the $2.6bn it paid for the company in 2005.
The new owners included Silver Lake Partners, the Canada Pension Plan Investment Board, and Andreessen Horowitz, a venture firm led by Netscape founder Marc Andreessen.
Skype’s founders, Niklas Zennstrom and Janus Friis, also joined the investment group after suing with claims that their company, Joltid, still retained the key technology to power Skype.
The SEC filing revealed Skype paid $343.8m to settle this dispute. As part of the settlement, Skype also invested $6m in Rdio, a new social music service founded by Mr Zennstrom and Mr Friis.
Skype, which last year became the largest carrier of international calls, has continued to grow briskly. In the year from June 30, 2009 to June 30, 2010, the company grew in registered users from 397m to 560m. During this time, users made 95bn minutes of voice and video calls.
“We believe the scale, global distribution and growth of our user base provide us with powerful network effects, whereby Skype becomes more valuable as more people use it, thereby creating an incentive for existing users to encourage new users to join,” the company said in its filing.
But most Skype users use the service for free. Just 8.1m of users pay and those that do are expected to spend an average of $96 each this year.
This is enough to keep the company profitable. In the first six months of this year, Skype generated $406.2m of revenues, but net income of just $13.1m. Of that, just $1.4m was income from operations.
To improve margins, Skype said it will focus on expanding its services for businesses and expanding its advertising and licensing. “We will continue to develop new monetisation models for our large connected user base,” it said. “We currently generate a small portion of our net revenues through marketing services (such as advertising) and licensing, which we expect will grow as a percentage of our net revenues over time.”
Skype’s filing comes a week after Demand Media filed for its own IPO, and could signal an opening in the long-stagnant market for public offerings.
Goldman Sachs, JP Morgan and Morgan Stanley are underwriting the Skype IPO, with Citi, Credit Suisse and others also participating.
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