eBay Acquiring Skype

eBay will acquire Internet telephony provider Skype Technologies for $2.6 billion in cash and stock, and as much as an additional $1.5 billion in future performance-based payments, both companies announced Monday.

Skypes VOIP (voice-over-IP) telephony software will help eBay drive existing and new e-commerce on the popular online auction site, said eBay Inc. officials. Skype SA, which has about 53 million registered users, provides software to let users talk for free over the Internet or pay to send and receive calls from landline or cellular phones.

"Skype can accelerate the velocity of trade on eBay and accelerate the volume of payments on PayPal, [which eBay acquired in 2002], while at the same time creating new lines of business and creating significant new monetization opportunities for the company," said Meg Whitman, president and CEO of eBay, in a conference call with the press and analysts today.

Whitman said the use of Internet telephony will ease the e-commerce process for many users because among other things it will allow users to communicate within the flow of a transaction, is more personal and instantaneous than e-mail, and is more private than traditional forms of voice communications that require a phone number.

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"The most obvious eBay categories to benefit are used cars, business and industrial, and high-end collectibles," said Whitman. These three areas comprise 40 percent of eBays global GMV, she said.

In addition to accelerating existing e-commerce, the new voice capabilities will help eBay move into new areas of trade, said Whitman. For example, she said, a pay-per-call offering could help eBay expand into trade categories that rely heavily on lead generation, such as new cars, travel, personal and business services, and real estate.

The acquisition is expected to close in the fourth quarter of 2005.

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