eBay’s Woes on Acquiring Skype
Posted on October 8, 2007 by C Johnson
Industry, Tech
In the first place, no one was really thrilled about it to begin with: a proposed feature that would allow eBay sellers to add voice-calling capabilities to their online stores. It wasn’t necessary, power sellers were lukewarm about it at best, and what’s more, the asking price was much too high. And yet eBay bought Skype in 2005 for a mind-blowing $4.1 billion dollars, confident that synergies between the two companies (such as the voice-call feature) would lead to major profits.
That’s right: 4.1 billion.
And so it should be of little surprise that the supposed Skype/eBay synergies ended up sputtering like a wet firecracker, and that the words ‘writedown’ and ‘eBay’ now go hand in hand. The reasons behind this failed marriage are numbered and, really, should have been obvious from the start. At the time of the acquisition, Skype’s popularity was soaring. But most Skype subscribers use it for it’s free Skype-to-Skype phone call services. Actual revenue comes from subscribers who use “Skype-In/Skype-Out” services to rent phone numbers—a sad fact that makes Skype hardly the profitable investment eBay believed/hoped/imagined it to be.
So last Monday, eBay announced that it would be paying Skype a third less than what it had originally promised and would be taking a $1.4 billion writedown. For you math whizzes out there, yes, that means eBay will be eating half of the purchase price. (Although that does make me feel remarkably better about overpaying $50 for a pair of boots at a Camden boutique … but that’s another blog post altogether.)
Article from Slashdot
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D’oh!
yawn…..Let’s see the boots.