Press Release: eBay to Acquire Skype
London, September 12, 2005 – eBay Inc.
(Nasdaq: EBAY; www.ebay.com) has agreed to
acquire
Luxembourg-based Skype Technologies SA,
the global Internet communications company,
for
approximately $2.6 billion in up-front cash
and eBay stock, plus potential
performance-based
consideration. The
acquisition will strengthen eBay’s global marketplace and payments
platform, while
opening several new lines of
business and creating significant new monetization opportunities for
the
company. The deal also represents a major
opportunity for Skype to advance its leadership in
Internet
voice communications and offer people
worldwide new ways to communicate in a global online
era.
Skype, eBay and PayPal will create an
unparalleled ecommerce and communications engine for
buyers
and sellers around the
world.
“Communications is at the heart of ecommerce
and community,” said Meg Whitman, President and
Chief
Executive Officer of eBay. “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.”
Founded in 2002 by Niklas
Zennstršm and Janus Friis, Skype offers high-quality voice
communications
to anyone with an Internet
connection anywhere in the world. The Skype software is easy to
download
and install, and enables free calls
between Skype users online. Skype’s premium services provide
lowcost
connectivity to traditional fixed and
mobile telephones. Skype’s software also offers a robust set
of
features, including voicemail, instant
messaging, call forwarding and conference calling.
Upcoming
product innovations include Skype
video, expressive content such as avatars, and customized toolbars
for
Outlook and Internet
Explorer.
One of the fastest growing companies
on the Internet, Skype already has 54 million members in
225
countries and territories. Skype is
currently adding approximately 150,000 users a day and has created
a
thriving ecosystem of products, services,
developers, and affiliates. Skype is considered the market
leader
in virtually all countries in which it
does business. In North America alone, Skype has more users
and
serves more voice minutes than any other
Internet voice communications
provider.
“Our vision for Skype has
always been to build the world’s largest communications business
and
revolutionize the ease with which people
can communicate through the Internet,” said Niklas
Zennstršm,
Skype CEO and co-founder.
“We can’t think of any better platform to fulfill this vision to
become the
voice of the Internet than with eBay
and PayPal.”
“We’re great
admirers of how eBay and PayPal have simplified global ecommerce and
payments,” said
Janus Friis, Skype
co-founder and senior vice president, strategy. “Together we feel we can
really change
the way that people communicate,
shop and do business
online.”
Zennstršm and Friis will
remain in their current positions. Zennstršm will report to eBay CEO
Whitman
and join eBay’s senior executive
team.
A Powerful Ecommerce and Communications
Engine
Online shopping depends on a number of
factors to function well. Communications, like payments
and
shipping, is a critical part of this
process. Skype will streamline and improve communications
between
buyers and sellers as it is integrated
into the eBay marketplace. Buyers will gain an easy way to talk
to
sellers quickly and get the information they
need to buy, and sellers can more easily build
relationships
eBay to Acquire
Skype../2
with customers and close sales. As a
result, 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.
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 personal and business
services,
travel, new cars, and real estate.
eBay’s other shopping websites -- Shopping.com,
Rent.com,
Marktplaats.nl and Kijiji – can
also benefit from the integration of
Skype.
PayPal and Skype also make a powerful
combination. For example, a PayPal wallet associated with
each
Skype account could make it much easier
for users to pay for Skype fee-based services, adding to
the
number of PayPal accounts and increasing
payment volume.
In addition, Skype can help
expand the eBay and PayPal global footprint by providing buyers and
sellers
in emerging ecommerce markets, such as
China, India, and Russia, with a more personal way
to
communicate online. And consumers in markets
where eBay currently has a limited presence, such
as
Japan and Scandinavia, can learn about eBay
and PayPal through Skype. Skype can also help
streamline
cross-border trading and
communications.
With its rapidly expanding
network of users, the Skype business complements the eBay and
PayPal
platforms. Each business is
self-reinforcing, organically bringing greater returns with each new user
or
transaction. The three services can also
reinforce and accelerate the growth of one another,
thereby
increasing the value of the combined
businesses. Working together, they can create an
unparalleled
engine for ecommerce and
communications around the world.
Transaction
and Financial Information
eBay will acquire all
of the outstanding shares of privately-held Skype for a total up-front
consideration
of approximately €2.1
billion, or approximately $2.6 billion, which is comprised of $1.3 billion in
cash
and the value of 32.4 million shares of
eBay stock, which are subject to certain restrictions on
resale.
The maximum amount potentially payable
under the performance-based earn-out is approximately
€1.2
billion, or approximately $1.5
billion, and would be payable in cash or eBay stock, at eBay’s
discretion,
with an expected payment date in
2008 or 2009. Skype shareholders were offered the choice
between
several consideration options for their
shares. Shareholders representing approximately 40% of the
Skype
shares chose to receive a single payment
in cash and eBay stock at the close of the
transaction.
Shareholders representing the
remaining 60% of the Skype shares chose to receive a reduced
up-front
payment in cash and eBay stock at the
close plus potential future earn-out payments which are based
on
performance-based goals for active users,
gross profit and revenue.
The above-mentioned
dollar and eBay share amounts are approximate, based on the
Euro-Dollar
exchange rate and eBay’s
stock price as of September 9, 2005. The final value of the stock component
of
the consideration may vary significantly
from this estimate based on the value of eBay stock at
closing.
Skype generated approximately $7
million in revenues in 2004, and the company anticipates that it
will
generate an estimated $60 million in
revenues in 2005 and more than $200 million in 2006. For
Q4-05,
eBay expects the acquisition to be
dilutive to pro forma and GAAP earnings per share by $0.01 and
$0.04
respectively. For the full year 2006,
eBay expects the transaction to be dilutive to pro forma and
GAAP
eBay to Acquire
Skype../3
earnings per share by $0.04 and $0.12
respectively, with breakeven on a pro forma basis expected in
the
fourth quarter of 2006. On a long-term
basis, eBay expects Skype operating margins could be in
the
range of 20% to
25%.
The acquisition is subject to various
closing conditions and is expected to close in the fourth quarter
of
2005.
About
eBay Inc.
Founded in 1995, eBay pioneers
communities built on commerce, sustained by trust, and inspired by
opportunity.
eBay enables ecommerce on a local,
national and international basis with an array of websites – including the
eBay
Marketplace, PayPal, Kijiji, Rent.com and
Shopping.com – that bring together millions of buyers and sellers
every
day.
About
Skype Technologies SA
Skype, the Global
Internet Communications Company™, allows people everywhere to make free,
unlimited,
superior quality voice calls via its
award-winning innovative peer-to-peer software for Windows, Linux, Mac OS
X,
and Pocket PC platforms. Skype is available
in 27 languages and is the fastest growing voice
communications
offering worldwide. Since its
launch in August 2003, Skype has been downloaded more than 163 million times
in
225 countries and territories. Fifty-four
million people are registered to use Skype’s free services, with over
3
million simultaneous users on the network at
any one time. Skype Technologies SA is headquartered
in
Luxembourg and is growing its offices in
London and Estonia.
www.skype.com
Forward-Looking
Statements
This announcement contains
forward-looking statements regarding Skype and the expected impact of the
acquisition
of Skype on eBay’s financial
results. Those statements involve risks and uncertainties, and actual results
could differ
materially from those discussed.
Factors that could cause or contribute to such differences include, but are
not
limited to, the timing of the closing of
the transaction, the possibility that the transaction may not close, the
reaction
of the users of Skype’s
services, the future growth of Skype’s user base and public acceptance of
Internet voice
communication services, rapid
technological changes in the Internet voice communications sector, the reaction
of
competitors to the transaction, global
developments in the regulation of Internet voice communication
services
including those provided by Skype, the
possibility that integration of Skype’s offerings following the
transaction
may be more difficult than
expected, and the possibility that entry by Skype and eBay into potential new
lines of
business will not be successful. More
information about potential factors which could affect eBay’s business
and
financial results is included in
eBay’s Annual Report on Form 10-K for the year ended December 31, 2004,
the
company’s Quarterly Reports on Form
10-Q, and current reports on Form 8-K. All forward-looking statements
are
based on information available to eBay on
the date hereof, and eBay assumes no obligation to update
such
statements.
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Posted: Mon - September 12, 2005 at 08:26 AM