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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    Mike (profile), 12 Sep 2005 @ 8:11pm

    Re: No Subject Given

    Hmm. I'm sorry, but if I'm a Skype user in Algeria, why is that going to make me want to use eBay all of a sudden? I like Skype for the communications... that's got nothing to do with eBay.

    As for the 5 million number, I'd say it's probably pretty accurate. The active users online at any particular time tends to be closer to 2 million, and a percentage of them do seem to leave theirs on all the time. So... yeah... I'd say 5 million is a lot closer to the number than the 54 million you claimed.

    Not sure I get your sleight of hand on users. It's pretty clear that more people use Google than eBay in general, so the more users stands. As for the cash on hand, you're right that they're similar, but what you're missing is the fact that for all of the others, the voice/IM offering ties back into other offerings (not with Goog yet, but soon). That's not true with eBay/Skype (despite what you claim).

    As for the synergies question, it was about eBay and Skype, not eBay and Paypal. The synergies there are clear, as you say.

    As for the houses... I still fail to see how eBay having Skype makes anyone any more likely to buy a house via them.

    However, the most important point, which you seem to ignore entirely is how in the hell any of this is worth $4.1 billion when they could have (a) partnered with Skype or (b) built their own for much, much, much, much, much less.

    I've read everyone's reasoning for the acquisition, and I haven't found one that sounds even remotely convincing.

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