Is Skype really worth $4.1 bn?

Now Skype is a great product. I use it myself on a daily basis, and there is a growing community of us - 179 million downloads so far! People are beginning to put their Skype ID on their business cards.

Having worked for traditional, well managed software companies, who slug it out year on year and produce healthy, regular profits of, say, 10%, but see their share price remain in a relatively steady state, I am constantly amazed at the valuation of some new technology companies. Like many I saw the headline number for eBay buying Skype last month at $2.6 bn without really thinking about it. But this is product which most of us download and use for free, and some pay modest amounts for extra services like voicemail and Skype Out to call external numbers at very cheap rates. Skype's estimated revenue for 2005 is $60 million, up from $7 million in 2004. How do these numbers work for eBay? But it gets even more interesting. Most will have missed the fact that, if certain performance targets are met, eBay said it would pay an additional $1.5bn to Skype over the next three years. What do the management at Skype have to do from a starting point of $60m revenue this year for the next three years to get the $1.5bn bonus? I know a few sales guys who would fancy that commission plan.

Now the usual rules of brand marketing will apply, and although Yahoo, Google and Microsoft have jumped on board with equivalent products, Skype are there first in the mind of us consumers. But is Skype worth that much? I don't believe we have entered a bubble era like the Dot.com boom, but the web 2.0 world will occasionally throw up big winners like this.

Technorati Tags : Skype, voip, eBay, technology, valuation