Last Updated Aug 9, 2010 4:49 PM EDT
Both companies are interested, obviously, in convincing investors to put money into their ventures. But unlike Demand, Skype has managed to make a normal GAAP profit in the last six months. The reason for the pro forma information helps explain why Skype doesn't just want an IPO, but needs it to pay for having bought its freedom and lost a legal dispute with the founders. And, ironically, that's the reason the company will look better to Wall Street than Demand.
The investor group that would buy Skype had to offer eBay $2.75 billion -- one big chunk of change. So the company had a debt load as it reentered independent existence.
According to Skype's S-1 filing, the company saw almost $719 million in revenue during 2009. For the first six months of being independent again, it saw $406.2 million, so the company is on a growth curve. However, profit for the half year is $13.1 million. Not so impressive, but understandable when you look at the reason.
Because of the acquisition of the company from eBay, there are some big increases in expenses. Here are a few examples:
- General and administrative costs have about doubled because the company must support them all on its own. There is a reason why businesspeople talk about the economies of scale, because expenses get spread over a wider base of business and so have less of an impact on any one part.
- Product development costs are up by about 20 percent to 25 percent, again, probably because R&D overhead is now concentrated.
- Skype went from carrying $340.5 million of intangible assets -- think of good will as a driver for the final purchase price -- to $805.6 million. The company has to amortize the costs, essentially writing off parts of them every quarter. That's a bigger chunk that now comes out of revenue.
Depending on which set of numbers you want to look at, Demand lost either $4.3 million or $22.3 million on revenues of $114 million in the first half of this year. But Demand's "Adjusted OIBDA" numbers show a company that made $25.6 million on revenue of $108 million. Much better!In addition, Skype doesn't have that pesky reliance on good relations with Google and the need to continually recruit freelancers, a crucial part of the business that doesn't scale simply through technology.