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Ebay swallows Skype for at least $2.6 billion

By - Source: Tom's Hardware | B 0 comment

London - Ebay today announced that it will purchase VoIP company Skype in a deal valued between $2.6 and $4.1 billion. The acquisition will allow the online auction leader to access Skype’s 54 million users and further diversify its revenue streams with Skype’s VoIP services - while free PC-to-PC-based calls will continue to be offered.

The acquisition comes after rumors about a possible deal between the two companies surfaced in the past week and confirms the mainstream appeal of VoIP communications for the business world. According to a statement released on Monday, Ebay intends to integrate Skype into its marketplace and payments platform. "Skype, Ebay and PayPal will create an unparalleled ecommerce and communications engine for buyers and sellers around the world," a statement said.

Skype, barely two years old, did not come cheap for Ebay. The online auction house pays $2.6 billion in cash and stock - roughly 371 times the revenue Skype achieved in 2004 - plus a performance-based bonus, which could amount to $1.5 billion and will be due in 2008 to 2009 time frame.

"Communications is at the heart of ecommerce and community," said Meg Whitman, President and Chief Executive Officer of eBay. "By combining the two leading ecommerce franchises, eBay and PayPal, with the leader in Internet voice communications, we will create an extraordinarily powerful environment for business on the Net."

According to Ebay, "communications, like payments and shipping, is a critical part" of online shopping processes. The company hopes that Skype will streamline and improve communications between buyers and sellers in its general online auctions - and increase velocity of trade in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles. Ebay indicated that Skype will be a tool to establish pay-per-call communications between sellers and buyers.

Despite the substantial investment, analysts believe that Skype will pay off for Ebay and create the dominating global VoIP provider on the Internet. "The foremost benefit for Ebay clearly is to add a voice client to its services and diversify its revenue with an excellent and strong product," said William Stofega, an analyst with IDC. "Ebay purchased an enormous worldwide brand that comes with a wonderful ecosystem already built. Besides that, the company receives a proprietary technology that does not rely on SIP, but on its own signaling protocols."

Most of Skype’s users however are believed to especially use the firm’s free PC-to-PC-based voice offering. According to Skype spokeswoman Kelly Larabee, users will be able to use this service free of charge after the acquisition. "We have not altered our commitment to the user," she told Tom’s Hardware Guide. "PC-to-PC calls will remain free."

Stofega believes that Ebay is unlikely to make any changes to the way Skype works today. "If Ebay is smart, they will not disrupt the perception of Skype," he said. He believes Ebay could provide Skype more marketing resources and create a more transparent developer community, but otherwise leave today’s service unchanged.

According to Ebay, Skype accesses about 54 million members in 225 countries and territories. The service adds approximately 150,000 users a day and is considered the market leader in virtually all countries in which it does business. In North America alone, Skype has more users and serves more voice minutes than any other Internet voice communications provider, Ebay said.

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