Update: eBay To Acquire Skype; Deal Could Top $4B

Auction site eBay said Monday that it plans to acquire VOIP powerhouse Skype Technologies SA for a whopping $2.6 billion in cash and stock.

The deal, worth $1.3 billion in cash plus 32.4 million shares of eBay stock, will command a substantial premium, 42 times Skypes expected 2005 earnings of $60 million. Skype expects revenue to grow to $200 million in 2006. Additionally, eBay will pay up to 1.2 billion euros or $1.5 billion in additional performance-based considerations, which could boost the total worth of the deal to $4.1 billion.

The agreement, reported earlier, would add a significant services play for eBay. Company executives said Monday that they see VOIP as a natural extension between buyers and sellers, pushing the auction technology into new geographies as well as pay-per-call services.

"Communication is at the heart of community and e-commerce, making Skype a natural fit for eBay," eBay president and chief executive Meg Whitman told analysts during a conference early Monday.

Company executives took pains to justify the purchase price, describing Skype both as a viable standalone business as well as a technology that could be integrated across eBays properties.

That, according to eBay chief financial officer Rajiv Dutta, made Skype a lucrative proposition. "We justified this internally on the belief that there are synergies," he said. "We are looking at the business as a standalone business, but over the long term as adding value to eBay and our commerce infrastructure."

Dutta said that eBay "has always been a financialy conservative company."

Resource Library:

Read the full story on ExtremeTech: Update: eBay To Acquire Skype; Deal Could Top $4B