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eBay's Skype Sale to Founders Now Looks Unlikely

Skype
A proposed buyout of eBay's Skype led by private equity, including Warburg Pincus and Kohlberg Kravis Roberts, and the Web telephone company's co-founders is unlikely to be completed, the Wall Street Journal cited sources as saying on its blog on Monday.

The founders of the service, which eBay (NASDAQ: EBAY) bought in 2005 for $2.6 billion, has teamed up with private equity firms KKR, Warburg Pincus, Providence and Elevation Partners, according to the newspaper's Deal Journal blog.

The proposal by the private equity groups and co-founders would involve eBay contributing some $1 billion to the deal, along with financing, sources told the Journal.

But both sides were still far from a deal, the Journal cited people familiar with the matter as saying.

eBay has signaled that it would be willing to part with Skype, after initially hoping that the telephone service -- in which buyers and sellers communicate via the Web -- could be integrated into its marketplaces business.

Many on Wall Street believe eBay would sell the business for the right price.

The New York Times reported on Saturday that Skype's founders -- Scandinavian billionaires Niklas Zennstrom and Janus Friis -- were interested in bidding on the company. It estimated that a deal was worth more than $2 billion.

Asked about the Times report, an eBay spokesman said on Monday the company doesn't comment on rumors or speculation.

Fast-growing Skype, which posted $550 million in revenue in 2008, is a star in eBay's portfolio, as is Web payments service PayPal, as eBay's traditional auctions business has slowed.

Analysts have pushed eBay to spin off or sell Skype or PayPal in order to return more cash to shareholders.