eBay buys Skype for 2.6 US billion

Auction site says yes to Skype

12 September 2005 13:25 GMT / By Stuart Miles

eBay has confirmed that it will acquire the VoIP company Skype for $2.6billion in up-front cash and eBay stock.

The acquisition is the first for eBay outside its core auction market and shows that the company isn't willing to sit back and watch other internet companies like Google and Microsoft surpass it on with intnernet functionality.

eBay is hoping that the combination of Skype, eBay and PayPal will create an unparalleled ecommerce and communications engine for buyers and sellers around the world.

"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."

One of the fastest growing companies on the Internet, Skype already has 54 million members in 225 countries and territories. Skype is currently adding approximately 150,000 users a day and has created a thriving ecosystem of products, services, developers, and affiliates. Skype 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.

"Our vision for Skype has always been to build the world's largest communications business and revolutionize the ease with which people can communicate through the Internet," said Niklas Zennström, Skype CEO and co-founder. "We can't think of any better platform to fulfill this vision to become the voice of the Internet than with eBay and PayPal."

Zennström and Friis will remain in their current positions. Zennström will report to eBay CEO Whitman and join eBay's senior executive team.

eBay is planning to integrate Skype into its auction site to improve communications between buyers and sellers as it is integrated into the eBay marketplace. Buyers will gain an easy way to talk to sellers quickly and get the information they need to buy, and sellers can more easily build relationships with customers and close sales. As a result, Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles.

The company is also looking at offering a pay-per-call service through Skype. Pay-per-call communications opens up new categories of ecommerce, especially for those sectors that depend on a lead-generation model such as personal and business services, travel, new cars, and real estate.

eBay will acquire all of the outstanding shares of privately-held Skype for a total up-front consideration of approximately €2.1 billion, or approximately $2.6 billion, which is comprised of $1.3 billion in cash and the value of 32.4 million shares of eBay stock, which are subject to certain restrictions on resale.

The acquisition is subject to various closing conditions and is expected to close in the fourth quarter of 2005.

The news comes just after it was rumoured that News Internation was interested in buying Skype as part of Murdoch's internet drive.