Skype's long history of owners and also-rans: At an end?

May 11, 2011: 5:59 PM ET

The company has been the ultimate under-the-radar survivor, changing hands, taking on debt, and preparing to go public, only to find a white knight in Microsoft.

By Dan Mitchell, contributor

FORTUNE -- Given the premium price Microsoft is paying for Skype, it's striking that the Internet phone company has spent so much of its short life being passed around like a cheap bottle of holiday wine. Also striking is the eye-popping level of debt Skype has accumulated over its life: $686 million.

Between the many investments in, offers for, and outright sales of Skype, the company stands among the most slatternly of big technology companies. Through it all, its valuation has continued to grow, with the largest leap coming Tuesday with Microsoft's (MSFT) announcement that it would pay $8.5 billion in cash and assumed debt for the company.

Skype was founded in 2003 by a couple of software writers, Niklas Zennström and Janus Friiswhose, whose previous gig was owning Kazaa, a file-sharing service mostly associated with music and movie piracy.

In 2005, eBay (EBAY) bought Skype for $2.6 billion. The idea was for buyers and sellers on eBay's online auction service to communicate with each other over Skype. Few did, and four money-losing years later, eBay, having never integrated the service into its auction business, sold 70 percent of Skype to a group of private investors for $2.75 billion.

Those investors included Silver Lake Partners, Index Ventures, Andreessen Horowitz and the Canada Pension Plan Investment Board. Although eBay faltered on its grandiose plans for the service, Skype's popularity (if not its profits) continued to grow under that company's ownership, and the bidding in was competitive. Google (GOOG) reportedly expressed interest, but ultimately bowed out for fear of alienating its wireless partners. Skype founders Zennstrom and Friis also reportedly tried to assemble investors to make a play, but that didn't pan out either. The only actual competing offer in August of 2009 apparently came from Elevation Partners, the private equity firm co-founded by U2 singer Bono.

A year later, Skype filed to go public, eventually announcing that it hoped to raise $1 billion. The same month it filed for the IPO, August 2010, came rumors that both Cisco (CSCO) and Google (again) were mulling offers for the company. Google was said to have pulled out over antitrust concerns. Well into this year, with plans for the IPO still in place, Skype's owners were reported to still be shopping the company around, with hopes of getting between $5 billion and $ 6 billion.

Last week, Reuters reported that Google (yet again) and Facebook were in talks with Skype, involving either a partnership or an acquisition. There was no mention of Microsoft. One of Reuters' sources said a deal for Skype "could be valued at $3 billion to $4 billion" -- one of the few reports in all of Skype's history that was lower than previous reports or actual valuations. Not surprisingly, it turned out to be way low.

It is open to question whether any of Skype's valuations ever made sense. Not only is it still losing money (net loss last year: $7 million, though it reported an operating profit of $286 million on $860 million in revenues), it's saddled with $686 million in debt, representing 8% of Microsoft's purchase price. And as Marc Andreessen, partner in Andreessen Horowitz, told Fortune"The only actual deal negotiation was with Microsoft. There were no other companies that we ran a process with. No other companies put an offer on the table like Microsoft did."

It seems Skype's long years of ups and downs may finally be over, thanks to Redmond's grand plans to integrate the service into everything Microsoft does. And even Microsoft's amorphous plans at this point feel far more concrete than anything eBay ever promised to do with the company. No matter what happens from here, it's unlikely Skype will find itself back out on the auction block, where contenders, pretenders, owners and investors alike all try to figure out how much to pay for a company that doesn't make a profit, and, once they do, what to do with it. But  then again, Skypers have heard this all before.

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