Skype did $126 million in revenue Q1

Ebay reported Q1 financial results late Wedensday. Personally I find Skype's development to be the most interesting. Skype had $126 million in revenue for the first three months of 2008, 63 % higher than Q1 2007 and about 9 % higher than Q4 2007. Not as seasonal as eBay's core marketplaces business. It doesn't seem unlikely for Skype to be doing a little over $600 million in revenue this year. Not too shabby. =)

For comparison, revenues for eBay marketplaces was $1.484 billion and Paypal $582 million for the same period.

Skype's revenue at $400 million a year

As eBay reported financial results I kept my eyes open for Skype's revenue. It grew 96 % (year-on-year) to $98 million in the quarter. However in the conference call Q&A eBay CEO Meg Whitman said Skype over-monetized and kept the net margin to high. When I've read media comments surrounding the Skype team getting "only" 1/3 of the earn out, the big problem seemed to have been that Skype didn't hit the financial targets. After the impairment charge eBay values Skype, a $400 million dollar annual Internet business growing almost 100 % year-on-year, at $2 billion on its books. Even Alley Insider thinks Skype is likely worth about $4 billion.

And the worst deal is....

I'm no Gartner analyst, but it is quite obvious that Skype is about $53 billion away (not taking the fall of the US dollar and inflation into account, in which case the difference would have been greater) from being the worst Internet-related deal of the decade. But who is counting?

Interview with Niklas Zennström, post-Skype CEO

Thomas Crampton has interviewed Niklas Zennström in conjunction with Niklas leaving the post as Skype CEO. [via: SIME 2007 Blog] An interesting read. Niklas touches upon Skype's market share (growing), monetization and Joost. I'm less bullish than Niklas on Joost (Joost hasn't given me the wow experience, yet, and I don't see Joost being competitive with piracy for the next 1-2 years), but agree with him that there are a lot of opportunity for innovation in e-mail. I think e-mail innovation is a more interesting area for technology entrepreneurs than search.

Related: Janus Friis' blog post (not) just another monday.

900 million dollars here, 900 million dollars there...

Not quite a billion, but $900 million is still a lot of money. Therefore it will be interesting to see if and how eBay's management explains its decision to write down the value of Skype with $900 million in addition to the earn-out payment of $530 million when eBay reports its Q3 results later this month.

With Skype making about $350 million in revenue this year and growing at an annual rate of about 100 percent, it is not obvious what the business is worth. Big Internet companies (Yahoo, Amazon, Google and eBay) currently has quite rich valuations, with price/earnings ratios between 30 and 100. If we for sake of argument would assume a net margin of 10 percent for Skype, the company would be making a profit of $35 million in 2007. Using the multiples of the publicly traded Internet companies, the current valuation would range from about $1 billion to $3.5 billion. Assessing fair market value and taking an impairment charge in such an environment is clearly as much an art as a science.

Skype lönsamt (!)

I samband med eBays kvartalsrapport för Q1 2007 meddelade bolaget att Skype omsatte $79 miljoner dollar och var lönsamt under samma period. Fortfarande stark tillväxt (både från tidigare kvartal och samma kvartal för ett år sedan).