NEWS > BUSINESS > EBAY FINALLY PAWNS OFF SKYPE

EBAY FINALLY PAWNS OFF SKYPE

September 2 2009

San Jose, CA – It’s likely that when Alexander Graham Bell was working on his invention he had some kind of idea that it was going to be important. Even in his wildest dreams though it’s unlikely that he would have been able to imagine how big
and how important that invention and those first few words would eventually become. With a world now fully interconnected and people able to speak to others half a world away as though they were in the next room, Bell’s invention continues to shape the future of the human experience.

One of the newest and most exciting inventions in the field of verbal communication has been the rise of Voice over IP, or VOIP. Enabling users to use their internet connection to speak with virtually everyone at little or even no charge the promise of the technology continues to excite. One of the leading proponents of the technology and philosophy of VOIP has been Skype which has become the most famous name in the industry. Despite that popularity and visibility the company has had difficulty earning revenue which has prompted parent company, eBay, to actively try to dump the $3 billion dollar burden. Though various attempts have failed the company has finally found a group willing to take troubled company.

“This deal achieves our goal of delivering short and long-term value to eBay and its stockholders, without the possible delays and market risk of an IPO,” said John Donahoe, President and CEO of eBay. “This is a strong strategic fit for both eBay and Skype and will allow both companies to continue to flourish. We want to make it clear that we see this as a rebirth and strengthening of both the eBay and Skype brands that will bring new success and equity to both companies, our shareholders, and most importantly our customers.”

The deal transfers 65 per cent of the equity to a consortium of investors. The company will receive $1.9 billion in cash and retain 35 per cent holding, far below what they paid.

“Skype has a viable economic model and will continue to draw dollars going forward. It’s very likely that the company will start to show a profit either next year or in 2011
but for eBay it’s one more company to take care of and they simply do not have the
resources to spread around that thinly and still remain viable themselves. This allows them to free up talent and dollars and focus on their core businesses and push them forward,” said Scrape TV Business analyst Ken Green. “It also has to come as a great relief to everyone involved. The Skype people now have a strong focus and eBay can get back to doing what it does. It has been particularly embarrassing for them considering the nature of the core business and that was hurting their relationships with users. For a company that makes billions from selling used goods to not be able to sell their used stuff, well it was hurting their brand. Hopefully they will come out of this with a positive attitude.”

It’s believed that company officials have little practical experience with their own site which has further complicated the sale of Skype. Reportedly they are more than happy with the dollar amount in the transaction despite it being significantly lower than their buy it now price.

“What this exercise should do more than anything is encourage the people that actually run the company to become a little more adept at using the site. Log on, buy some stuff. One of the biggest problems with all companies of this size is they often don’t have hands on experience on the field level and that can cause problems when they try and do things like make a sale,” continued Green. “Companies in the web age are different from traditional ones in a lot of ways but eventually as they get bigger and bigger they start to take on some of the lesser attributes of those companies and suffer as a result. Now that they’ve scuffled Skype maybe they will have a little more time in their own eBay stores.”

Despite being around from the beginning, eBay has still not reached power selling ranking and has 83 per cent positive rating.    

William Ashford, Business Correspondent

NEWS > BUSINESS > EBAY FINALLY PAWNS OFF SKYPE