eBay Admits It Overpaid for Skype

Value loss of $1.4bn in accounts

[trillianjedi]

The online auction firm said Skype was worth $900m (£450m) less than it paid for it and set aside $530m to meet future pay-outs to some shareholders.

Together that amounts to a loss of value of $1.43bn, compared to the $2.6bn price paid for Skype in 2005.

[news.bbc.co.uk...]

[Habtom]

I thought estimates of future profits are done in more of statistics based and not much of optimisim.

Why hasn't skype generated the expected profits?

[engine]

So, if eBay paid too much for this, have Google paid too much for YouTube, Yahoo too much for BlueLithium, etc?

[trillianjedi]

YouTube is all about eyeballs, so long term Google can't fail to make money out of it. It's a core part of their business (advertising).

eBay/Skype is a more complex and less obvious relationship. The intent, I'm sure, was "community" and engaging buyers and sellers in a different way. But they've yet to do anything with the platform to deliver products that do that. It's possible they've hit some major technical or business case issues.

I do feel they were pressured into buying it for fear of someone else getting it (MS and Google were both in the frame at the time).

I would put it down as simply a bad decision, not an indication necessarily of market-wide overvaluations of social networks.

Why hasn't skype generated the expected profits?

Because something like 75% of the Skype userbase use it for IM and not for making phone calls.

[RandomDot]

The auction model is nice - it gets people the best prices for their products, and some people go over the top because they're in a bidding war - you know how it is - you get caught in the moment, especially if some of the other people around you are also interested in it ... you want it even more. A popular auction site in my country even got me to do it a few times - but not with that much money though ;)

Perhaps it's just a business model - sell it while it's good and there's not too much competition on the market. Perhaps it's just alot of money which could be used on a tropical island and some tequilas! without ever worrying about what to do next - don't know.

With regards to microsofts interest in skype... last time I looked at the messenger beta it was implementing a talk function so you could talk with your friends who was online. Quality wasn't that good - but... competition to skype and other services like that is coming in a hard way -

[vincevincevince]

This sounds like an accounting strategy. Accountant 1: "We need to chop $900 million from our assets..." Accoutant 2: "Well, we'll devalue Skype as an asset by claiming we overpaid for it".

[oddsod]

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System: The following message was spliced on to this thread from: http://www.webmasterworld.com/webmaster/3467195.htm [webmasterworld.com] by engine - 5:58 pm on Oct. 2, 2007 (utc +1)

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According to the BBC:

The online auction firm said Skype was worth $900m (£450m) less than it paid for it and set aside $530m to meet future pay-outs to some shareholders.

article [news.bbc.co.uk]

[Sharpseo]

I wonder what Skype's revenue is like. I don't think they're profitable, are they?

Vonage is now only worth $154 million, according to their market cap (symbol VG). And they have over 2 million customers, $745 million in revenue/year. They're losing lots of cash, but still have $250+ million left.

Seem like a great takeover target. Well, except that their commercials trash all their potential suitors, like Verizon, Sprint, & Comcast...

[kaled]

Like anything else, a company is worth what someone will pay for it. Ebay could have tried to sell Skype to cut their losses, or even show a profit, but they chose to devalue it - I'd say that's an admission that they paid over the odds because they didn't want it to fall into the hands of Google or Microsoft.

Kaled.