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    What Is eBay Thinking?

    By
    David Coursey
    -
    September 13, 2005
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      I have to admit to being initially perplexed when the news about eBay buying Skype reached my desk. For hours, I tried over and again to make sense of the deal, trying to understand what Id missed. It wasnt until late in the day that it dawned on me: The reason eBay buying Skype doesnt make sense is precisely because it makes no sense. None. Nada. Zilch.

      Summed up in a short sentence, eBay has shown itself to be a company of many dollars and little sense. Its hard to imagine the company making back this sort of investment and certainly whatever Skype brought to the table could have been gotten elsewhere for a lot less.

      eBay seems to have purchased Skype with the intent of building its VOIP technology into eBays shopping and auction engine. One analyst told me it was a build-or-buy decision for eBay, which took the “buy” route in acquiring Skype.

      eBay wants buyers and sellers to speak to one another. Theres also the possibility of live real-time auctions using VOIP. And theres the possibility that Skype will continue to offer a VOIP service independent of eBays stores and auctions.

      The analyst suggested that by purchasing Skype, eBay had somehow missed the bullet of having to support a zillion incompatible VOIP services. That doesnt wash with me, as eBay could have bought some other VOIP company for a lot less money, or merely made an investment in Skype, or just anointed a VOIP provider as its chosen partner with no money changing hands. Actually, I suspect someone would have been happy to pay eBay for the privilege of being its VOIP company.

      /zimages/2/28571.gifClick here to read what analysts are saying about eBay buying Skype.

      So, theres no way that adding VOIP to eBay should have cost the between $2.6 and $4.1 billion dollars that Skype is getting. The move can be only explained this way: The company whose auctions are used to set the fair price for so many things doesnt know the value of a dollar. This may actually make sense when you have as many dollars floating around as eBay does. (I can only imagine who Google may yet purchase with its loot).

      While Im aware that Skype has developed a following, until eBays money truck arrived, Id always expected a telco to end up acquiring the Skype, but not until competition heated up. Right now, VOIP seems too much in the air to declare winners and losers, but that didnt stop eBay from making Skype a huge winner—and, perhaps, taking them out of the broad market for good.

      Skype is a bad purchase for eBay, but since eBay had the money to burn we may never understand precisely how bad.

      As for the days other big deal, Tom Siebel left Oracle to compete with Larry Ellison, had a brief heyday when there was oodles of money floating around, and now is getting his comeuppance from a presumably still-not-amused Mr. Ellison. I can almost hear the gloating as Oracle takes down another loathsome competitor.

      The world will now pause, collectively exclaim, “Larry, youre such a stud!” and get on with our business. I hope Larrys ego was properly stroked. Sometimes, I find it almost sad that Larrys egomania and good business decisions so often line up.

      Buying Siebel is a good thing for Oracle, especially because Siebel didnt put up a nasty fight. Its also a deal that should have happened a year or two sooner, perhaps thus pre-empting the public execution of PeopleSoft. Had Seibel been purchased first, PeopleSoft would have found itself in waters hostile enough that Oracle could have considered the company effectively vanquished. Or, at least, available later on at a better price.

      /zimages/2/28571.gifClick here to read more about Oracles acquisition of Siebel.

      Instead, it should be fun to watch Oracle try to turn seven different CRM packages from four companies (Oracle, PeopleSoft, J.D. Edwards, and Siebel) into something like a unified product. Given that the customers of acquired companies had the chance to buy Oracle but refused, it will be fascinating to see what sort of deals Oracle is willing to make to in order to keep them.

      Oracles move to roll up much of the CRM business also presents an incredible opportunity to Salesforce.com, SAP and a host of smaller companies. They will doubtless work hard to take advantage of the inflection point Oracle has created. Given the enormity of the support, migration, and development task facing Oracle, I expect its remaining competitors to do well in grabbing some unhappy Siebel, PeopleSoft, and J.D. Edwards customers. How happy can they possibly be?

      Contributing editor David Coursey has spent two decades writing about hardware, software and communications for business customers. He can be reached at david_coursey@ziffdavis.com.

      /zimages/2/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.

      David Coursey
      One of technology's most recognized bylines, David Coursey is Special Correspondent for eWeek.com, where he writes a daily Blog (blog.ziffdavis.com/coursey) and twice-weekly column. He is also Editor/Publisher of the Technology Insights newsletter and President of DCC, Inc., a professional services and consulting firm.Former Executive Editor of ZDNet AnchorDesk, Coursey has also been Executive Producer of a number of industry conferences, including DEMO, Showcase, and Digital Living Room. Coursey's columns have been quoted by both Bill Gates and Steve Jobs and he has appeared on ABC News Nightline, CNN, CBS News, and other broadcasts as an expert on computing and the Internet. He has also written for InfoWorld, USA Today, PC World, Computerworld, and a number of other publications. His Web site is www.coursey.com.
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