VoIP service Skype has reportedly delayed its IPO until later in the year, citing a need for higher revenue and a plan to get the company “in better shape”.
This latest report highlights what many analysts believe to be a fairly shaky plan for an IPO, given the company said it has doubts over whether the company can ever become profitable.
“We may incur net losses again and cannot assure you that we will be profitable in the future or that, if we are, we will be able to maintain profitability,” it said at the time.
The move comes after the company filed an IPO registration with the Securities and Exchange Commission last year that mentioned a maximum proposed offering amount of $US100 million, but also said there are doubts that the company could ever become or remain profitable.
According to a report in the Wall Street Journal, Skype is now looking at an IPO in the second half of the year with chief executive Tony Bates feeling under pressure to get the company in a more presentable state.
Bates is a fairly new addition to the company, being named as chief executive in October last year. He has the responsibility of turning the company into just a simple VoIP service into a multi-tiered operator with a focus on enterprise accounts.
Now the WSJ says that according to people “familiar with the matter”, Bates wants “to get his feet underneath him and understand the business and the voice of the company”. The report also cites that the economic turmoil in the US is delaying the plan for an IPO, as it could undervalue the firm.
Bates has already been forced to iron out some issues at the company – last month it suffered a glitch that brought voice traffic down for several hours, affecting businesses as well as individual users who depend on the service for handling calls.
At the time, experts highlighted the fact that given Skype now carries above 10% of international voice traffic, it needs to spend more time in developing fail-safes and more sophisticated backup techniques.
The glitch could have been one of the factors in prompting the delay for the IPO, which some have said could be the biggest tech listing in several years.
Skype also purchased mobile video recording company Qik this month for $US100 million, and could require more time to integrate the two before an IPO goes ahead.
The company has tens of millions of users, but its key issue is that it has limited ability to generate longer-lasting revenue products apart from individuals buying “minutes”.
According to the SEC filing, Skype has 560 million registered users, but only 8.1 million of those are paying customers.
In the past few months, Bates has made an effort to focus on products for businesses and more paid services for individuals. More enterprise products are expected for this year, including products for advertising, gaming and personal gifts.
It also has another problem – more competitors are entering the VoIP game. In the United States particularly, Google’s Voice program, which allows users to replace their phone numbers with a single number, is gaining more popularity among younger users.
But the WSJ report also hints that a group of Skype’s owners, including Silver Lake Partners, are open to a sale worth between $US5-6 billion.
That would represent a substantial increase from a round of investments last year that valued the company at $US2.7 billion.
According to the SEC filing, Skype recorded $US406 million in revenue for the first six months of 2010.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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