eBay to acquire Skype

September 13, 2005 - (HOSTSEARCH.COM) - September 12, 2005 saw eBay Inc.’s announcement of its intention to purchase Internet Telephony company Skype Technologies SA. The move created a level of confusion amongst analysts, with some speculation over the benefits eBay will gain from the acquisition. Luxembourg-based Skype produces software which allows customers to make low-cost worldwide phone calls via the Internet. eBay’s adoption of Skype’s services could allow the company greater global reach and enable a transition to a ‘pay-per-call’ revenue model. In this model Internet advertising directs a user to a merchant’s telephone number or prompts a return call from a merchant. In both instances an advertiser receives referral charges.

eBays’ acquisition will see the company paying an initial $1.3 billion in cash, a further $1.3 billion in stock, and further payments in 2008 or 2009 that are dependent on financial targets being met. The total value of the deal could be upwards of $4.1 billion. John Delaney, Principal Analyst for Ovum's Consumer Group was quoted as suggesting “eBay has definitely overpaid for Skype”.

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