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Monday, September 12, 2005
EBay to Buy Skype


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.


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