ebay buys Skype for $2.6 billion

Filed in archive Venture Capital on September 12, 2005

This deal seems almost unbelievable:

"STOCKHOLM, Sweden (AP) -- Online auctioneer eBay Inc. agreed Monday to pay at least $2.6 billion in cash and stock for Internet-telephony provider Skype Technologies SA, confounding many analysts who questioned the lofty price tag and the companies' compatibility.

The total value of the deal may climb to $4.1 billion based on whether Skype meets a series of performance targets over the next three years, San Jose, Calif.-based eBay said. It said the acquisition would create "an unparalleled e-commerce and communications engine" for Internet users worldwide.

Skype has 53 million registered users and the company says more than 2 million people use Skype at any given moment. Since it was introduced in 2003, the company's free software has been downloaded more than 164 million times.

In 2004, the company generated about $7 million in revenue, which it projects will snowball to $60 million this year and more than $200 million in 2006.

EBay recently trounced analysts' expectations by reporting it earned $291.6 million, or 21 cents per share, for the three months ended in June, a 53 percent increase from last year. Revenue totaled $1.09 billion, a 40 percent increase."

First congratulations for the Skype founders - Skype is probably one of the biggest and fastest exits in the last 5 years. Just a bit more then a year ago Skype was valued $100 million.

Second the press release is full of dull statements what ebay wants to do with it.

"New line of businesses for Skype"

or

"Internet commerce and communication engine"

all would fit nicely into the time 6 years ago with many "visionary" acquisitions. I still can't help but wonder why ebay sees that much value in having Skype in house - but ebay obviously has shown before that they know what they are doing...