Skype SA seeks to raise $100 million through an initial public offering (IPO) in the U.S., as the Luxembourg-based provider of Internet telephony, video calling and instant messaging communications seeks to diversify and boost its user base and revenue.
In a filing with the U.S. Securities and Exchange Commission on Monday, Skype said it plans to use the money it raises from the IPO for "general business purposes" as it pursues a strategy to grow both its base of free users and paid subscribers, increase its marketing and advertising revenue, and expand its services for businesses.
In its SEC filing, Skype said that most of its revenue comes from fees its charges for its SkypeOut service, which it also wants to see grow and which lets users make calls outside of the Skype domain to regular phone lines and mobile devices.
"Skype is a bit more than a plain VOIP play in that it has a set of APIs and is actively working to develop its ecosystem of applications. This plus the fact that it can claim revenues and growth should position it well in its IPO," said IDC analyst Al Hilwa via e-mail.
However, Skype's valuation won't reach astronomical levels because it plays in an increasingly competitive space against services like Google's Voice and Apple's Facetime, as well as against VoIP services from telecom and cable companies, Hilwa said.
"Also, eBay found out it was hard to take Skype to a broader social network play beyond telephony related services," he said.
In the first half of 2010, Skype increased its net revenue 25% to $406.1 million from $324.8 million in the same period in 2009. However, net income dropped to $13.1 million from $22.5 million.
Skype, founded in 2003, was acquired by eBay in 2005 for $2.6 billion. In November last year, eBay sold 70% of the company for $1.9 billion in cash and a note from the buyers in the principal amount of $125 million.
An investor consortium led by Silver Lake and including Andreessen Horowitz and the Canada Pension Plan Investment Board bought a 56% stake, while Skype co-founders Janus Friis and Niklas Zennstrom acquired 14%. The deal put Skype's value at $2.75 billion.
As of June 30, Skype had a monthly average of 124 million free users and 8.1 million paying users, up from 91 million free users and 6.6 million paying users, respectively, in the second quarter of 2009. Total registered users grew from 397 million in 2009's second quarter to 560 million in 2010's second quarter.
In addition to Internet telephony, video calling and IM, Skype also offers SMS, screen sharing and file transfer services.
In the IPO, Skype plans to issue ordinary shares in the form of American depositary shares (ADSs) on the Nasdaq Global Select Market. The underwriters are Goldman Sachs, J.P. Morgan and Morgan Stanley.
Skype hasn't determined how many shares it will offer, nor the price range for the proposed IPO, the company said in a statement.