Stock of the Day
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eBay (EBAY)
eBay Sells 65% Share of Skype for $1.9 Billion
When someone mentions eBay, the first thing that probably comes to mind is the company's popular auction and shopping website, used by millions of people around the world to sell their possessions. However, you might not know that eBay also owns Skype, and internet communication company, which allows users to make telephone calls to anyone across the globe, via the internet, for a fee. eBay purchased Skype in 2005 for a total cost of $3.1 billion, and it has been viewed as a troublesome purchase for the company. Today, however, eBay announced that they are selling Skype. What are the arrangements of the deal, and how will it affect eBay?
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Although the two companies seemed like a strange match, eBay had been optimistic that they could incorporate Skype into their business model, and the company fought hard to outbid other companies including Google (GOOG: Charts, News, Offers). eBay initially had planned to use Skype so that eBay users could talk to each other, although the feature never became popular with users. Starting in April 2008, the company took a year to evaluate Skype and decide how to move forward, and in April 2009 they announced that they would somehow be spinning off Skype. At that point they were considering offering an IPO in 2010, and although they also talked with other companies (including Google), ultimately the deal has moved forward with Silver Lake Partners.
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eBay is selling a 65% stake of Skype to a group of private investors led by Silver Lake Partners, and will retain a 35% stake in the company. The investment group will be paying $1.9 billion in cash and a $125 million note when the deal is completed, probably by the fourth quarter 2009. The deal values Skype at $2.75 billion, which is higher than anticipated. The financial arrangement is good for eBay, as most people would agree they paid too much to purchase Skype, and retaining a share of the company will allow them to still profit from the company (although they weren't able to integrate it well, Skype is still quite profitable, with revenues of $551 million last year). Although the initial purchase of Skype was widely criticized, eBay seems content with how they have resolved the matter, and for now investors seem to agree, gradually sending shares up this morning. Perhaps in the long run, this deal didn't work out so poorly for eBay after all.
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eBay Commentary:
Skype Sale Nears: Why eBay Shareholders Should Be Mad - Why does this blogger think that eBay is making the wrong decision in selling Skype?
Skype Doubles Connection Fees For Some International Calls - Perhaps overshadowed by the news of the sale of the company, Skype has just announced some major changes to its fee structure.
California's garage sale reels in buyers aplenty - eBay isn't just used by individuals - in fact, this past weekend it was used for part of the "Great California Garage Sale."
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Boeing's Commercial-Jet Chief Bails Out - Things keep going downhill for Boeing (BA: Charts, News, Offers) - amidst all the company's production difficulties, one key executive has now announced an early retirement.
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