EBay has agreed to buy the fast-growing Internet start-up Skype in a move to add free Web telephone calls to its online auctions and fuel growth, the companies confirmed on Monday.
EBay said it plans to pay $1.3 billion in cash and $1.3 billion in stock for the Web
communications company. It would make a further payout of up to $1.5 billion by 2008 or 2009 if
financial targets are met, giving the deal a total value of up to $4.1 billion, executives of the
two companies said.
EBay is renowned for an Internet business model linking millions of buyers and sellers, but its
core U.S. market is maturing, slowing to annual growth of between 20 percent and 30 percent a
year, compared with 50 percent international growth.
Skype, which said it expects revenue of $60 million this year and more than $200 million in 2006,
has raced to the lead in the booming voice-over-Internet (VOIP) market, which is being
aggressively targeted by online powerhouses like Yahoo , Google and Microsoft .
In just two years, Skype has attracted 54 million members to its free Internet-based voice service
and is on pace to roughly double in size within a year.
Luxembourg-based Skype offers a free service when users make computer-to-computer calls to other
Skype users. Charges apply when Skype users make calls to regular phone numbers.
But in a move to strengthen the bonds between eBay buyers and sellers, the company will also
encourage eBay merchant sites to use Skype software to allow customers with last-minute sales
questions to click to talk to a customer service agent.
Executives of the two companies justified the combination by saying that the power of so-called
"click-to-call" services to convert shoppers into buyers represents a far more lucrative form of
selling proposition than advertising can. Skype also plans to add video calling and other features
to its software.
The deal is expected to complete in the fourth quarter.