eBay's Acquisition of Skype - Will the Gamble Work?

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Case Details:

Case Code: BSTR226
Case Length: 17 Pages
Period: 2003-2006
Organization: eBay Inc
Pub Date: 2006
Teaching Note :Not Available
Countries: USA, Europe
Industry: Internet & e-Commerce

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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eBAY's $2.6 Billion Gamble Contd...

eBay was not the only company seeking to dominate the Internet space. Yahoo! Inc. (Yahoo!)⁸, Google Inc.⁹ (Google), AOL LLC¹⁰ (AOL), and software giant Microsoft Corporation¹¹ (Microsoft) were also actively trying to expand their influence over the Internet economy.

By end 2004, Voice over Internet Protocol (VoIP) was emerging as the hottest new business opportunity for Internet companies. Analysts noted that the main factor driving the growth in VoIP was the increased penetration of broadband. At the global level, almost 24.5 million broadband connections were added in the first half of 2005, taking the total registered broadband connections to 176 million as on June 30, 2005. ¹²

Thus, VoIP was touted as the 'next big thing' that would be driven by the popularity of broadband Internet services.

VoIP companies with large subscriber bases were prime takeover targets for these Internet companies and there were numerous media reports about potential deals.

The buzz on eBay's moves was finally laid to rest in September 2005, when it announced that it would buy Skype Technologies SA (Skype), a growing Internet communications company, for US$ 2.6 billion (US$ 1.3 billion in cash and US$ 1.3 billion in stock)...

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8] Yahoo! Inc., is a leading Internet services company headquartered in Sunnyvale, California, USA.

9] Google, Inc. was co-founded by Sergey Brin and Larry Page in 1998. Google is the world's most popular Internet search engine and has a diversified range of products such as E-mail, blogs, etc.

10] AOL LLC (formerly known as America Online, Inc.), is one of the largest Internet access subscription service providers in the US. AOL LLC is a subsidiary of the media conglomerate, Time Warner Inc.

11] Bill Gates and Paul Allen established Microsoft Corporation in 1975. Over the next two decades, Microsoft emerged as one of the richest and most influential companies in the world. Microsoft is engaged in developing, manufacturing, licensing and supporting an extensive range of software products and services for a range of computing devices.

12] http://www.dslforum.org/PressRoom/Q205DSLsubscribernumberspresentation.ppt