eBay, VeriSign Strike Online Payment Deal

The online auction company plans a $370M purchase of VeriSign's payment gateway business, expanding eBay's own PayPal service and further securing transactions with a one-time password system.

Online auctioneer eBay Inc. announced Monday that it plans to buy VeriSign Inc.s payment gateway business for $370 million, as it looks to further secure transactions by eBay users.

A payment gateway is used to instantly authorize and manage online transactions.

That division of VeriSign, an online security specialist based in Mountain View, Calif., took care of $40 billion worth of online purchases last year, which represents a significant expansion of eBays own PayPal transactions division, according to both companies.

/zimages/3/28571.gifRead details here about VeriSigns purchase of the Weblogs.com ping server, and how it affects the threat of blog spam.

Moreover, as part of the agreement, a project to begin next year has eBay, of San Jose, Calif., using a VeriSign system to secure transactions with one-time passwords, according to statements from both companies.

eBay said in a statement that it expects the deal, planned to close by 2006, to boost its 2006 revenue by $100 million.

/zimages/3/28571.gifClick here to read contributing editor David Courseys commentary on eBays acquisitions strategy.

"This acquisition allows PayPal to grow our merchant services business even more quickly," PayPal President Jeff Jordan said in a statement.

This is the second recent major purchase in as many months for eBay.

In September, the online retailing and auction pioneer said it would acquire Internet telephony provider Skype Technologies SA for $2.6 billion in cash and stock, and as much as an additional $1.5 billion in performance-based payments.

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