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eBay acquires Skype Technologies

September 12, 2005

eBay has finally agreed to acquire Skype Technologies, an Internet phone services company based in Luxembourg, for approximately $2.6 billion in cash and stock.

The total value of the deal may increase based on "potential performance-based consideration," eBay said. The online auction company said the acquisition will create "an unparalleled e-commerce and communications engine" for Internet users worldwide.

Skype has 54 million users in 225 countries and territories, the company said, adding that it is acquiring about 150,000 users a day. In North America, Skype has more users and serves more voice minutes than any other Internet voice communications provider, according to the companies' announcement of the deal today.

"Communications is at the heart of e-commerce and community," said Meg Whitman, eBay's president and chief executive. "By combining the two leading ecommerce franchises, eBay and PayPal, with the leader in Internet voice communications, we will create an extraordinarily powerful environment for business on the net."

Cable providers and Bell companies are expanding quickly into the rapidly growing market for Internet-based phone service, as are eBay rivals like Microsoft and Google.

Skype allows users who download its software and register for its service to talk to one another free over the Internet through their PC's. About two million Skype customers have signed up for a premium pay service that allows them to use their PC's to make calls to regular phone numbers as well as receive calls from regular phones.

Skype's software also offers features that include voicemail, instant messaging, call forwarding and conference calling.

Last month, Google announced a service similar to Skype's free service called Google Talk, and Microsoft said it was acquiring Teleo, a San Francisco company that allows users to call conventional phones from their PC's.

The discussions between eBay and Skype were first reported last week in The New York Post and The Wall Street Journal.

The acquisition of Skype is eBay's biggest purchase since it bought the Internet Auction Company of South Korea in 2004 for $4.3 billion. EBay has been aggressively acquiring companies, many of them overseas, as it reaches beyond its core online auction business.

Skype was founded in 2002 by Niklas Zennström and Janus Friis, who also founded Kazaa, the popular and controversial file-sharing service. The two men will remain in their current positions. Mr. Zennström will join eBay's senior executive team and will report to Ms. Whitman.

Source: The NY Times

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