SkypeBay done for $4.1 Billion.

71 Comments

Update: So the deed is done – $4.1 billion. EBay will pay $1.3 billion in cash and $1.3 billion in stock for the online communications company. It will make a further payout of up to $1.5 billion if certain financial targets are met, Reuters reports. Charlie Sierra calculates: “So at 50m downloads, that’s $52/download, or $26 In CASH per download.” Downloads, are the new “Pageviews” it seems! ;-) Also that works out to about $20 million/Skype employee – which is ten times what Cisco paid at the top of the bubble when it bought companies.

A few quick thoughts before I get to a long analysis. It is a tactical admission that the fraud on eBay is so huge, that the company had to spend considerable amount of dollars to do something about it. I don’t think, Skype will be the white knight for eBay – which has been facing executive exodus and general loss of market momentum. I mean, if you can put up a website, and buy Google adwords, you are taking eBay out of the equation. Will SKype help prevent that shift? Not sure, it will.

A few months ago, I wrote, Mr. Metcalfe Meet Market Reality – a piece that highlighted that eBay’s natural growth days might be over. This is proof the company, which is floundering a bit, is looking for new markets. I don’t think this is as much about voice as it is a quest to get a new set of users. Also what does it say about eBay – the company that buys Skype after Yahoo, Google and others had passed on it?

Stock Markets don’t like the fact that the deal will slice a “cent per share” off eBay’s earnings about a cent per share until the end of 2006, adds Reuters. Stocks down 1.81 percent to $37.93 after skidding 4% last week when the rumors first emerged. Still big up to Skype investors – Mangrove Capital Partners, Draper Fisher Jurvetson, Bessemer Venture Partners and Index Ventures – especially DFJ who have hit a “Barry Bonds” style homerun with this sale.

Here is Andy, Jeff Pulver, Jon Arnold and Mark Evans take on this. James Enck’s succinct summary is a must read.

Business Week reports that EBay is hosting an investor call at 5 am pacific time tomorrow morning – which they call unusual. Is this the eBay-Skype announcement? FT has a story saying the deal is in the works for $4 billion or change. “Honestly, I still don’t see the logic at anything near that price, but it could be we’ll find out shortly what eBay has up its sleeve,” writes BusinessWeek’s Rob Hoff. Me neither – it is a strange acquisition, if that indeed is the case. Yet another proof, in SV there is a sucker on every exit! More of my opinion, and what others think!

71 Comments

morris

Maybe they should have purchased Xten, a public softphone maker, who they could have had for a few tens of millions. Heck they could have paid double that company’s market cap and still received a good deal. Partner with a service provider, and take a penny or two off the traffic generated with eBay’s universe and voila!

http://www.tmcnet.com/usubmit/2005/sep/1181000.htm

Mark Conway

It’s a Paypal Injection Mechanism-
Skype will be used to catalyze the real opportunity for Ebay which is the bundling of Paypal merchant services into Skype. At EBay Developer’s conference a few weeks back Jeff Jordan talked about Paypal’s opportunities- both on and off-ebay. He estimated the off-Ebay opportunity as an addressable market for merchant services of $300 BILLION in 56 countries. Any Skype user will be getting not only voice capability but also essentially banking/merchant services bundled in. With only 1% overlap in current users of Skype and Ebay/Paypal that sounds like a decent way to get new folks onto both platforms. Capturing an annuity stream of transactions via Paypal makes those users worth a bit more than some people think (though I have no idea how to quantify it).

Ab

Aswath: If you have wsj access, see the this article in the asian section: Online Phone Services
Spur Backlash in China (sep 12)

State Telecom Giant Blocks
Users From PC Calling
Offered by Skype, Others

Skype Technologies SA and other Internet-telephony companies could face difficulties in one of their most promising markets, as a Chinese state-owned phone company appears to be moving to bar Chinese users from some of the companies’ services.
…….
Chinese government regulations classify Internet telephony as “basic telecommunications” businesses, which its rules dictate can be offered only by China’s six major telecom carriers. The operator in China Telecom’s Shenzhen office said the company’s policy was implemented because Internet phone service has “disturbed the telecom market order.” She said customers who violate the policy have their service cut off and can’t have it restored unless they sign a pledge not to use it again.”

I hope I’ve clarified the point. This problem is pretty similar to what it will face when it enters India in a organized way.

Rick

Forget the price tag; it just doesn’t make sense. Ironically, EBay must not like shopping around. They should have checked their own website for alternatives before blowing billions.

The synergies are enormous. Voip is not just POTS anymore. It’s all about communicating anywhere, anytime over anything about anything anyone wants to sell to anyone else.

Total paradigm shift for telecom anals. Telecom is no longer; it’s now Anycom.

Jesus is still Lord.
And the days are still short.
Believe and be saved.

chris holland

i do buy other arguments made regarding “desktop presence” (Mik) and integrating eBay listings and notifications into Skype (Jesse).

But this to me points again to the strength of the large established Skype user base, rather than Skype as a compelling platform. Skype happens to be this “thing” that sits on many users’ desktops, and that alone is valuable, more so than “Skype as a VoIP platform”.

I’m just wondering how well Skype is going to keep doing, when most everybody else has migrated to SIP-based alternatives?

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