eBay named as $5bn suitor for internet telephony group Skype
Friday, 9 September 2005
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EBay, the online auction company, is in talks to acquire Skype in a deal that could value the internet telephone service at as much as $5bn.
Speculation that the Californian giant might snap up the until-recently relatively obscure Luxembourg-registered company sent eBay's shares down more than 4 per cent on Wall Street yesterday.
Talks are ongoing, according to sources close to the company, but could fall through as Skype decides whether to proceed alone or opt for a sale. Analysts said yesterday the Skype service could prove useful for buyers and sellers on eBay, but also questioned whether it was a sign that eBay was struggling to sustain its historical growth levels.
Martin Pyykkonen, an analyst at Hoefer Arnett, said: "I don't see a lot of point to eBay buying Skype ... If eBay were to make this sort of move it would basically be admitting that 'our core market is decelerating'."
Skype was set up two years ago by two Swedes, Niklas Zennström and Janus Friis, but has generated considerable hype recently on the back of rapid growth. Its software, which allows consumers to make free telephone calls by using a headset and an internet connection rather than a normal telephone line, has 52 million users worldwide.
Although the privately owned company has not yet broken into profit, it has already attracted a string of possible acquirers because ofthe market's general assessments of the potential for voice-over internet protocol (VoIP) technology.
Speculation about which companies would like to buy the company has included Microsoft, Yahoo! and News Corporation. Rupert Murdoch, the chairman of News Corp, said at the company's results last month: "We've had conversations with them. They have made it perfectly clear, the founders, that they do not want to sell and we respect that. We'd be very happy to work with them in some way."
An alternative to an acquisition could be a joint venture and the company is also understood to be considering a flotation.
Niklas Zennström, Skype's London-based chief executive, said in an interview with The Independent last week: "We do not make comments on rumours. Once we have done something ... I can't comment. The last time we raised money, in January last year, we said then we shouldn't need any more before we break even. That's still the case. But we can still raise money to grow the company one way or another. We have options."
The Wall Street Journal reported that eBay might offer $2bn to $3bn, while the New York Post said Skype could reach $5bn.
There have been a flurry of moves into the VoIP sector recently. Google has launched its Google Talk service, while Microsoft bought Teleo last week. Yahoo! has bought Dialpad to offer a similar service.
