EBay is finally acknowledging that it paid too much for the Internet phone company Skype two years ago.
On Monday, eBay, based in San Jose, California, said it was taking a US$1.43 billion charge related to the acquisition of Skype.
EBay paid US$2.6 billion for the rapidly growing service in 2005.
Since the purchase, Skype's membership rolls have swelled past 220 million. But the company has not had as much success making money as it has had growing. Skype does not charge its users for calls to other Skype users. There is only a small fee for calls to landline numbers and cellphones.
Skype earned US$90 million during the second quarter of this year, far below eBay's projections. EBay said in a regulatory filing that the charge was "the result of the updated long-term financial outlook for Skype."
The Skype deal helped to initiate a renewed acquisition frenzy in the online world and a return to what some call a bubble mentality.
After the spectacular dot-com flameout seven years ago, Internet executives pledged to begin judging technology companies by revenue rather than by something as ephemeral as "eyeballs," or traffic on a Web site.
But somewhere along the line, the high-tech industry reverted to its old form.
"We are almost going back to year 2000 types of errors," said Aaron Kessler, a senior Internet analyst at Piper Jaffray. Internet companies "are buying users instead of revenue and profitability. That's what eBay did for Skype. They saw a great asset with tons of users but no clear monetization path."
EBay has struggled to turn Skype's popularity into profits. This year Skype added a "yellow pages" directory and ways for its users to rate businesses. Neither of those features has drawn much attention or activity.
EBay has also begun to integrate Skype calling into auctions on the eBay marketplace, in the hope that buyers and sellers would communicate better. But the success of that integration is almost impossible to measure.
"It has seemed relatively clear that Skype has underperformed even modest expectations for the last two years," said Derek Brown, an analyst at Cantor Fitzgerald.
EBay also said on Monday that as part of the US$1.43 billion charge it was making a US$530 million payout to Skype shareholders. When it bought Skype, eBay pledged to pay up to US$1.7 billion if Skype met certain user growth and revenue goals.
The company also announced that Niklas Zennstrom, Skype's chief executive and one of its founders, was stepping down to become nonexecutive chairman and would focus on his entrepreneurial efforts outside the company.
Hani Durzy, an eBay spokesman, said the parting was mutually agreed upon.
"He could have continued to run the company, but he wanted to focus on new opportunities. He's an entrepreneur at heart," Durzi said.
Michael van Swaaij, eBay's chief strategy officer, will act as chief executive of Skype until eBay hires a replacement.
The high price eBay paid for Skype now brings to mind some of the most flagrant mistakes of the first dot-com boom, like Time Warner's purchase of America Online -- and how some of those mistakes could be repeated in a new investment frenzy.
"Right after the bust, people started focusing on business models and revenue," said Greg Sterling, a Silicon Valley analyst and consultant. "There has been a little bit of departure on that, with a focus on building the biggest audience and figuring that revenues will follow. That is the attitude that has prevailed over the last couple years, and it may not be sound."
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS