April 14 (Bloomberg) -- EBay Inc., the most-visited U.S. e-commerce site, is planning an initial public offering for its Skype Internet-calling unit, which the company bought in 2005 for $2.6 billion.

The IPO is slated for the first half of 2010, though the timing will depend on market conditions, the San Jose, California-based company said today in a statement.

Skype’s sales grew 44 percent last year to $551 million, outpacing EBay’s total growth. It handles 8 percent of all cross-border voice traffic, making it the world’s largest provider of international calls, according to research firm TeleGeography in Washington. Even so, it doesn’t fit well with the company’s other businesses, EBay Chief Executive Officer John Donahoe said.

“The numbers on the business have been phenomenal,” said Paul Bard, an analyst with Renaissance Capital LLC in Greenwich, Connecticut. “I think there would be substantial investor interest.”

The IPO could raise $500 million to $1 billion for EBay, depending on how much equity it gives up, Bard said. Skype’s market value could be $3 billion to $5 billion, he said. Goldman Sachs Group Inc. will lead the underwriting.

Investor Pressure

The division, which lets people make calls and hold videoconferences over the Internet, accounts for about 6 percent of EBay’s sales. Donahoe has faced pressure from investors to split off the unit and focus on improving EBay’s e-commerce site, where revenue is dropping.

EBay rose 45 cents, or 3.1 percent, to $14.83 in late trading after closing at $14.38 today on the Nasdaq Stock Market. The shares have climbed 3 percent this year.

Skype’s founders, Niklas Zennstrom and Janus Friis, had approached several private-equity firms about buying the company from EBay, the New York Times reported last week, citing people familiar with the matter.

“I don’t think this limits their options in any way of what they could do with Skype,” said Soleil Securities Group Inc.’s Laura Martin, referring to EBay’s management. The Los Angeles- based analyst has a hold rating on EBay shares, which she doesn’t own.

IPO Drought

Donahoe is looking to the public markets at a time when demand for IPOs has evaporated. Mead Johnson Nutrition Co., a former Bristol-Myers Squibb Co. unit, was the only IPO by a U.S.-based business last quarter. The company, the world’s biggest maker of baby formula, raised $828 million in February. Last year, 20 companies went public in the first quarter, raising a total of $24 billion.

Filing for an IPO doesn’t exclude a private buyer from swooping in, said David Menlow, president of IPOFinancial.com in Millburn, New Jersey.

“If the company that’s coming public is viewed as undervalued, then it’s a possibility the deal could be canceled,” Menlow said. EBay could then turn to “a private- equity or other company that can come up with an appropriate amount.”

KKR & Co., the buyout firm run by Henry Kravis and George Roberts, considered purchasing the company with Skype’s founders, the Wall Street Journal reported this week, citing people familiar with the situation.

“It is clearly our intent to pursue an IPO,” said Alan Marks, an EBay spokesman. “We are not soliciting bids. If somebody submits an offer, we’ll take a look at it.”

Donahoe’s Reforms

Since taking over the company a year ago, Donahoe has changed EBay’s selling fees, improved its search engine and integrated its PayPal payment-processing unit more tightly with the e-commerce site.

This week, he sold EBay’s StumbleUpon unit because it didn’t fit with the rest of the company. That business, which helps people find Web sites that interest them, was purchased in May 2007 for $75 million. StumbleUpon founders Garrett Camp and Geoff Smith bought back the unit for an undisclosed sum.

Microsoft Corp. and Google Inc. could be potential bidders for Skype, analysts say.

“It hasn’t happened, so it tells you there may have been offers but at levels EBay deemed too low,” said Jim Friedland, an analyst at Cowen & Co. in New York. “They haven’t been able to sell at the valuation they wanted and are going with plan No. 2.”

‘Tremendous Synergies’

In 2006, then-CEO Meg Whitman said Skype had “tremendous synergies” with PayPal and EBay’s auction site. She envisioned buyers and sellers using Skype to communicate about expensive items. EBay wrote down the value of the acquisition to $1.2 billion in 2007, signaling that it had overestimated the unit’s potential.

Zennstrom and Friis, who founded Skype in 2003, also created the Kazaa file-sharing software.

Donahoe said in April 2008 that he would spend a year evaluating whether Skype was a good fit for the company. Since then, he has said Skype is a good business and that the company was in no rush to get rid of it.

“Operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential,” Donahoe said today in the statement.

Bridgepoint Education Inc., which offers postsecondary courses online and in classrooms, and Rosetta Stone Inc., a seller of language-learning products, are both holding IPOs this week. Bridgepoint raised $141.8 million today, while Rosetta expects as much as $106.3 million.

“I think 2010 can shape up to be a very healthy market for IPOs,” Bard said. “There is a lot of pent-up supply.”

To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

Last Updated: April 14, 2009 19:37 EDT