EBay selling 65% stake in Skype to private investors

SAN JOSE, California -- EBay is trading control of the online telecommunications service Skype for about $2 billion, reversing a 2005 acquisition that many analysts considered a head scratcher from the beginning.

The company famous for its online marketplace said Tuesday it is selling a 65% stake in the business to a group of private investment funds for $1.9 billion in cash and a $125 million note, while retaining a 35% stake.

EBay said the deal values the company at $2.75 billion.

EBay said earlier this year that it would spin off Skype, which provides voice and video connections via the Internet, after struggling to justify its 2005 acquisition of the company for $2.6 billion.

EBay hoped buyers and sellers on its auction site would use the service but it never became popular. It took a $900 million write-down on Skype in 2007, tacitly acknowledging it had overvalued the business.

The group of investors buying the stake includes Andreessen Horowitz, the new $300 million fund set up by Web browser pioneer Marc Andreessen. Led by the private equity firm Silver Lake, the group also includes Index Ventures and the Canada Pension Plan Investment Board.

EBay expects the deal to close in the fourth quarter of this year.

Shares in the San Jose-based company climbed 44 cents, or 2%, to $22.58 in morning trading Tuesday.