A closer look at Skype acquisition

A few years ago, Skype co-founders Niklas Zennstrom and Janus Friis were persona non grata in the United States, scared to enter the country in case they were arrested for unleashing file-swapping Kazaa on the Internet. This week, they were glowing in the limelight as they sold their second venture to eBay. Now, instead of having to base themselves in Luxembourg to avoid legal threats, Zennstrom and Friis were fêted by eBay CEO Meg Whitman.
Skype already has 54 million members (2 million who make paid-for calls to traditional land lines using SkypeOut) in 225 countries, adding 150,000 users a day. The company generated $7 million in revenues in 2004, and anticipates more than $200 million in 2006. For the full year 2006, eBay expects the transaction to be dilutive to pro forma and GAAP earnings per share by $0.04 and $0.12 respectively. On a long-term basis, eBay expects Skype operating margins could be in the range of 20% to 25%.
eBay buyers and sellers email each other before concluding transactions, with eBay estimating five million such messages are exchanged every day. Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles. Skype offers a growth opportunity for eBay, which is nearing saturation in the United States where most of its customers are based; while half of Skype’s users are in Europe and only a quarter in the US. The acquisition also enables eBay and Skype to pursue entirely new lines of business. For example, in addition to eBay’s current transaction-based fees, ecommerce communications could be monetized on a pay-per-call basis through Skype. Pay-per-call communications opens up new categories of ecommerce, especially for those sectors that depend on a lead-generation model such as travel, cars and real estate.
The Skype business complements the eBay and PayPal platforms. The three services can also reinforce and accelerate the growth of one another, thereby increasing the value of the combined businesses. The Skype Journal predicts that the acquisition could invert the eBay model, with Skype technology allowing eBay to match up auctioneers with interested buyers. Skype down the road will enable eBay to aggregate consumer demand and auction it in the same way they currently auction consumer goods. All of us should come to recognize today's announced acquisition of Skype by eBay, as one of the great indicators of the historic transformation in telecommunications industry. It turns the entire telecom industry picture on its head, and demonstrates that voice, presence and text messaging will be essential for the company of the future.