Skype Planning IPO

After 7 years in business, VOIP company Skype has filed for an IPO. InformationWeek has more:

The Luxembourg-based company said it expects to sell as much as $100 million of depositary shares held by existing owners.

Founded in 2003, Skype pioneered VoIP calling and now claims 560 million registered users with 52 to 124 million active users; 8.1 million of those customers pay for the service. Users can call other Skype users free of charge and calls to public phone networks are completed at low rates.

From its earliest days, the firm showed interest in floating an IPO, but it was acquired by eBay for $2.6 billion and additional later considerations. The VoIP service proved to be a poor fit and eBay moved to jettison Skype. Its co-founder Niklas Zennstrom said eBay had paid too much for Skype.

Zennstrom and co-founder Janus Friis then filed litigation against eBay, which had failed to acquire key Skype software when it purchased the VoIP company. The litigation was settled when the Skype founders received an undisclosed amount of Skype equity. Now, they stand to cash in again because of the IPO.

Cool IPO, but don’t the majority of Skype users use it for free? TechCrunch’s Erich Schonfeld has more numbers:

As of June 30, Skype was averaging 124 million users a month, with only 8.1 million (6%) of those paying users (out of a total of 560 million registered users). Those users, however, pay an average of $96 a year. Skype’s strategy is to keep growing its overall number of users and convert more of them to paying customers.

Getting more people to buy Skype-Out minutes will obviously not be sufficient. Skype also plans on adding advertising revenues and enterprise products (37 percent of users surveyed say they use Skype for business purposes). According to the filing, part of Skype’s strategy will be to:

Develop new monetization models, including advertising. Our users made over 152 billion minutes of Skype-to-Skype calls in the twelve months ended June 30, 2010. We believe this represents a meaningful opportunity to increase our revenue from alternative monetization models, including advertising, gaming and virtual gifts.

Focusing more on business users might also prove lucrative for Skype. I wonder if this IPO will lead to another hot tech stock, without the sustainability.