Skype acquired...again

[c1ue]

Gives you an idea just how stupid Whitman was...

http://www.pcworld.com/article/12251...6_billion.html

Sep 12, 2005 8:00 am Online auction site EBay has agreed to acquire Internet telephony company Skype Technologies for $2.6 billion, the companies have announced.

http://english.aljazeera.net/busines...383288743.html

10 May 2011 13:12
Software giant Microsoft plans to acquire Skype, the online video conferencing service for $8.5bn, both companies have announced.

This constitutes the 2nd Horseman of the 2nd Internet Apocalypse.

[aaron]

Re: Skype acquired...again

Whitman was stupid? (or are you being sarcastic )

I see a $2 billion investment that has increased 400 percent. It seems like a brilliant trade to me. Basically, they bought low and sold high, just like they tell their users to do. Whitman should get a commission.

[c1ue]

Re: Skype acquired...again

I see a $2 billion investment that has increased 400 percent. It seems like a brilliant trade to me. Basically, they bought low and sold high, just like they tell their users to do. Whitman should get a commission.

It wasn't Ebay/Whitman that sold to Microsoft.

Ebay sold Skype in 2009...

http://news.cnet.com/8301-1035_3-10322833-94.html

September 1, 2009 7:08 AM PDT E-commerce giant eBay announced Tuesday that it is selling its Skype unit to an investor group that includes Marc Andreessen's new venture.


Under the deal, eBay will receive approximately $1.9 billion in cash and a note from the buyer in the principal amount of $125 million, for a total of $2.025 billion. The participants expect the deal to close in the fourth quarter.

Still want to give out that commission?

[Milton Kuo]

Re: Skype acquired...again

It wasn't Ebay/Whitman that sold to Microsoft.

Ebay sold Skype in 2009...

http://news.cnet.com/8301-1035_3-10322833-94.html

Still want to give out that commission?

According to the following article, eBay also kept a 35% equity stake in Skype:

http://technorati.com/business/artic...osoft-pays-85/

With that 35% stake, that means eBay made a handsome profit.

That said, however, I think eBay's profit in this instance is due to luck and not business acumen. eBay is lucky that Microsoft seems hell-bent on making stupid acquisitions (viz. the near-acquisition of Yahoo!, which only didn't occur because Yang was even stupider and refused the deal.)

[aaron]

Re: Skype acquired...again

OUCH

Thanks Clue for giving me a clue.

This all sounds very evil --> almost like the investment group already had lined up the sale.

[c1ue]

Re: Skype acquired...again

This all sounds very evil --> almost like the investment group already had lined up the sale.

The reality which Andreesen et al understand is that the only way Social Networking - i.e. Internet Y2K 2.0 - is going to make money is if it is able to horn in on Google's Internet 1.0 advertising revenue stream.

There is big money attempting to do so - and the Microsoft acquisition, as well as Android/Nokia, Apple iTunes, etc etc are all lining up to stake out their turf in this struggle.

Mobile access to internet/email, VOIP, GPS/GIS - these are all weapons in this fight.

Understanding this paradigm and the breathless valuations of Facebook, LinkedIn, etc isn't rocket science.

With that 35% stake, that means eBay made a handsome profit.

That's a nice way to spin a completely confused series of business actions.

Let's keep in mind it wasn't as if Ebay was hurting for cash, and sold Skype in order to get past some hump.

Equally it wasn't that Ebay understood the bubbly nature of the fight for next generation internet advertising dollars and was choosing to focus on their core competency - auctions - which in turn have nothing whatsoever to do with the next generation internet advertising.

It is the blind leading the deaf.

It wasn't luck exactly either - most likely a normal due diligence of keeping your toe in. After all, the acquirer would have had to come up with more cash if it were a full buyout. Far safer to buy control but keep being able to use part of Ebay's capital investment.

[BK]

Re: Skype acquired...again

I have no idea whether MSFt paid too much for Skype - but, a Kinect -Skype integration would seem to be a home run for Microsoft. Video Conferencing is happening from homes and well happen more in the future. Kinect is a camera and in a perfect place in homes to be the Go-to place for video conferencing for personal use or calling the office.
Any Kinect users /fans in the iTulip crowd - its a pretty fascinating product for MSFT ADDing Skype to the Mix seems like a Win (I cannot attest for the Math of the transaction- I have No expertise there).

[c1ue]

Re: Skype acquired...again

Skype tried to go IPO - luckily it failed (for Ebay). Lucky for us, Skype had to file financial data as part of its pre-IPO disclosure:

http://www.sec.gov/Archives/edgar/da...182561/ds1.htm

Summary Statement of Operations Data for the Six Month Successor Period ended June 30, 2010 and the Six Month Predecessor Period ended June 30, 2009
Results of operations for the six months ended June 30, 2010 are not necessarily indicative of the results of operations that may be achieved for the entire year.

		Predecessor						Successor
		Six months ended June 30, 2009						Six months ended June 30, 2010
		(thousands of U.S. dollars, except share data)
Net revenues:		$	324,838					$	406,170
Cost of net revenues(1)			161,138						199,820	(2)
Gross profit			163,700						206,350
Operating expenses:
Sales and marketing(1)			57,343						70,998
Product development(1)			20,549						29,950
General and administrative(1)			23,681						46,824
Amortization of acquired intangible assets			31,147						57,154	(2)
Total operating expenses			132,720						204,926
Income (loss) from operations			30,980						1,424
Realized loss on amended credit agreement			—						(13,513	)(3)
Interest income and other (expense), net			(6,119	)					31,330
Interest expense			—						(35,606	)(4)
(Loss)/income before income taxes			24,861						(16,365	)
Income tax expense / (benefit)			2,327						(29,486	)
Net income		$	22,534					$	13,121
Basic and diluted net income per share (Class A through I):(5)								$	—
Basic and diluted net income per share (Class J):(5)								$	13.88
Weighted number of shares, basic and diluted (Class A through I):(5)									8,486,873
Weighted number of shares, basic and diluted (Class J):(5)									942,986

The good news: $406M in revenue in the first 6 months of 2010.

The bad news: they only made $13M in profit on this large sum. Yes, $57M was amortization of intangible assets (i.e. R & D writeoff), but the cost structure is huge.

Not sure at all how well this scales up - what is interesting is apparently only 8.1 million users paid during June 2010.

The other interesting part is that Skype, as well as Netflix are both dependent on unlimited bandwidth.

As Netflix in particular strains the paradigm of that model - which BTW exists only in the US as far as I know - it would be interesting to see just how dramatically these 2 internet institutions would be affected by pay per use pricing models.

Certainly for Netflix - even a rumor of such a pricing change would crush their stock value, though I do have the highest respect for their management.