What's a good price for Skype Ltd?

New York Times reports Skype founders Zennstrom and Friis are raising about $1 billion to buy back Skype. The article says some analysts think eBay would want at least Skype's book value: $1.7 billion.

So what would a good market value be? Skype are profitable to the tune of $100+ million/year. Ten times earnings seems lowball to me.

Two years from now Skype could easily have $1 billion in revenue. At current 20% profits, that's $200 million in free cash per year. 10x suggests a $2 billion value.

Unless there's a premium for growth. Skype might easily step into adjacent markets. $1 billion run rate in three years for a light version of WebEx-style conferencing. $1 billion in two years for a cloud computing platform that lets you build Skype into your web apps and enterprise systems. $1 billion in four years for Skype inside of televisions and set top boxes.

Despite eBay's protestations, there are also massive opportunities for eBay-Skype-PayPal synergy. What eBay and PayPal do for markets that bring together buyers and sellers of atoms, eBay+Skype+PayPal could do for markets of service, information, education, and entertainment, a much larger market. Sadly, every eBay alum I've talked with in the last six months says eBay execs are incapable of that much innovation, head stuck firmly inside the 1999 eCommerce box.

Which leaves us with the price.

At what price will eBay sell?

tags: skype, ebay, financials, marketvalue

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