Now It's eBay That's Supposedly Ridiculously Overpaying For Skype

from the make-it-stop,-please... dept

No, please. Make it stop. Seriously. We thought that Skype's hype bubble might be deflating a bit after people began to realize that Google, Yahoo and Microsoft were all in a position to offer a nearly identical offering. However, the Skhype continues. We laughed at the ridiculous suggestions all the way up the chain. It started when Skype, a company that most assume makes somewhere between $10 million and $50 million, was being valued at $1 billion, no $3 billion, oh wait, it's the mind-blowingly ridiculous $6 to $10 billion. It seemed like each rumor was built upon the earlier one -- all in the course of a single month. It was almost getting too silly to pay any attention to, but here come the rumors again. Two separate sources are now claiming that eBay is on the verge of buying Skype for somewhere between $2 billion and $5 billion. The two sources are the Wall Street Journal (saying $2 billion to $3 billion) and the NY Post (saying $5 billion). Obviously, the WSJ is a bit more credible, but there is almost no conceivable scenario under which this deal makes sense. It's not anywhere near eBay's core competence, and while you could see some ways in which eBay could make use of a VoIP service, there's no way any such service could possibly be worth $2 billion to them. The Post says the two companies have been negotiating exclusively, but that exclusivity is about to end. Everyone admits that the deal might fall through, and if there really is such a deal, then you'd hope someone would come to their senses and drop it soon. No matter what, you have to give credit to whatever PR people Skype has drummed up to get these rumors going. The rate at which their supposed value inflated is truly stunning -- more so than just about anything seen during the original internet bubble years.


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(Flattened / Threaded)

  1.  
    identicon
    bob roberts, Sep 8th, 2005 @ 3:38am

    Skype and Ebay

    Yes, your point is well taken. There are too many things that can happen in the very near future to degrade such an unusual purchase by Ebay. As an investor in Ebay this would not suit me well. Ebay's Executive Employee Greed will indeed cause the company to stumble.

     

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  2.  
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    DoxAvg, Sep 8th, 2005 @ 4:28am

    Perhaps not Ebay as such...

    While any valuation starting with a "b" is simply out of control, I can see a tie-in not with Ebay but with PayPal. With PayPal championing the micropayments front, they could make a compelling and low-impedence tie-in with Skype. Just give your PayPal account and password, then make all the calls you want, without setting up an additional billing system.
    Of course, this could be a bit of a spurious link that could be applied to anything... "Rumor has it that EBay is going to start gobbling up grocery stores because PayPal will make it easier to buy Snickers bars...."

     

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  3.  
    identicon
    you are wrong, Sep 8th, 2005 @ 8:23pm

    No Subject Given

    Suppose they are doing $50M revenue (I hear they are doing much more but let's use the numbers you keep throwing around).

    $2B acquisiton price = price/revenue of 40x. Google/Ebay are trading around between 15x-20x price/sales.

    Skype is growing revenues & earnings much faster than Google/Ebay.

    Not that crazy.

     

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  4.  
    icon
    Mike (profile), Sep 8th, 2005 @ 10:08pm

    Re: No Subject Given

    Heh. Well, you can prove all sorts of crap depending on which stats you use.

    However, we're talking very different situations here. Google and eBay are both *profitable* businesses showing long term staying power. Skype has shown nothing of the sort. At the same time, Skype is now facing competition from very powerful forces with a lot of money who are in a position to completely give away what Skype charges for in an effort to boost other businesses.

    Even more important, the ability to recreate what Skype has done would cost significantly less than $2 billion.

     

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  5.  
    identicon
    you are wrong, Sep 9th, 2005 @ 3:40pm

    Re: No Subject Given

    _obviously_ its not about buying the technology for its own sake and of course you can build the tech for less than $2B. skype is about brand, user base, and a team that consists of brilliant product designers & marketers.
    the point is that on purely financial metrics skype is expensive but not insane. paying 40x/revs (when your own stock that is valued at 20x/revs) for what is arguably the fastest growing private company in existence (or perhaps even in the last 10 years) is simply not crazy. reasonable people can disagree as to whether its a good idea, but its not crazy.
    also, not sure why you think skype isn't profitable. do you just make this stuff up or do you know their numbers? personally, i'd be a bit more circumspect without having insider knowledge of the financials.

     

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  6.  
    identicon
    Carlo, Sep 9th, 2005 @ 3:57pm

    Re: No Subject Given

    If you're going to ask Mike to be "a bit more circumspect without having insider knowledge of the financials", you should be too, and leave your financial metrics out of the discussion, since Skype has never disclosed its revenues.

    It behooves Skype to keep everybody in the dark regarding things like its real user base (not the pointless number of downloads), the takeup of its paid services, and its revenues. That way, using your "financial metrics" can't enter the equation and it's got to be valued on all its intangibles.

     

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