It's Official: eBay Has Too Much Money (Some Of Which Is Now Skype's)

from the defend-that-valuation dept

This evening the rumors increased, and as of a few minutes ago, it's now official that eBay is vastly overpaying for Skype. It's a great deal for Skype, and a ridiculous one for eBay. They're paying $1.3 billion in cash, $1.3 billion in stock and apparently there's another $1.5 billion on the line in incentive payouts based on various performance metrics over the next three years. I understand that Skype has a great product (I use it all the time) and I understand that they've built up a nice community. However, the community wasn't that large and very few of the users were paying (and even those who were paying weren't paying very much). In the meantime, Yahoo, Google and Microsoft are all getting into the same market with much bigger war chests and much bigger user-bases. Are there ways that eBay can integrate Skype into their current offering? Yes, somewhat. However, the buzz going around that this will let buyers and sellers talk to each other is ridiculous. I've bought and sold plenty of stuff on eBay, and not once have I ever wanted to speak to the person I was dealing with. The talk about synergies with Paypal seem even more tenuous. There seems to be very little in the way of real synergies between the two companies at all. About the only thing this suggests is that eBay is worried that it's existing business is in trouble and it needs help fast -- and apparently the best way to do that is to significantly overpay for a VoIP offering with too much hype.

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  1. identicon
    Bob, 12 Sep 2005 @ 6:22pm

    No Subject Given

    "but most people put the *active* users much closer to 5 million" --> I dont know where you get your nubers from but Skype has about 3 million active users online at any given time so unless those five million are taking turns in 12 hour shifts seven days a week I would say you are much further off the mark.


    Ebay's business plan is to expand into two fronts, the global market and into markets not usualy associated with ebay, home sales, stronger car sales personal services. Skype can help with both, they have an unusualy global footprint and although the culture here avoids personal contact in sales situations it is very different in say Algeria, where business is done differently.

    "You have three larger companies with more cash and many more users" --> wrong on all counts, you dont "Ebay" the origin of chile peppers and you dont "google" your used ipod, so I dont understand where the relevence of "more users" comes from. But to put that aside lets look at some numbers everyone agrees upon...

    http://finance.yahoo.com/q/ks?s=GOOG

    http://finance.yahoo.com/q/ks?s=YHOO

    http://finance.yahoo.com/q/ks?s=EBAY

    as you can see they are all roughly the same size with very similar cash flows and cash on hand, the exception being Microsoft.

    "explain the synergies" (paypal and ebay), uh well, hmm its obvious the vast majority of ebay items are paid for using paypal to tie this in directly is a no brainer.


    "What percentage of eBay sales are houses" --> Ahh yes but thats just exactly it isnt it!? They are expanding into new markets, once again you show you have failed to educate yourself on the most basic reasonings for the acquisition.

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