Deal done. Retail VOIP in the offing? Views later.

eBay 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.

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 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.

Full text of news release...

On Skype.com:

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 Zennström 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 low-cost 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 Zennström, 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.”

Zennström and Friis will remain in their current positions. Zennström 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 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 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.

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.

The eBay announcement:

***A New Way to Communicate***

I’m excited to let you know that eBay plans to acquire Skype, the leader in online voice communications.

Skype has set a new standard in online voice communications with
outstanding sound quality and unmatched ease of use. And like eBay,
Skype has a fast-growing community -- some 54 million Skype users
around the world already use their PCs to talk with one another.

And best of all, conversations between Skype users via PC are free. You
can get up and running on Skype in just a few minutes. Just go to http://www.skype.com/go/x.home to learn more and download the free Skype software application. Try it – it’s fun!

Over time, we intend to make voice communications a part of the eBay
marketplace – a huge step forward in making transactions faster and
easier, as well as bringing even more interactivity and humanity to the
eBay Community.

You can include your Skype ID in your About Me page. For now, however,
Skype links may not appear in View Item pages. We’ll be working with
you, our Community, over the next few weeks to thoughtfully work out
the details of how eBay and Skype will interact, including any policy
changes that may be required.

We expect this acquisition to be finalized soon. In the meantime, you can learn more about our Skype plans in the news release we issued just a few minutes ago.

Working together, eBay, PayPal and Skype will redefine online trade and
community. I hope you’ll join us in this exciting new chapter in eBay’s
history.

Sincerely,

Meg

Last Tuesday we were all waiting for Google Talk. By Wednesday we had Google Talk, MSN Messenger's 7.5 with video and quality talk, Skype opening up SkypeNet and SkypeWeb.

Something's breaking through. "Something wonderful."

Let's talk about it over spicy noodles at Jing Jing. Come one, come all. Bring friends and spread the word.

Join the bloggers of Skype Journal: Phil Wolff, Stuart Henshall, and Bill Campbell in town from Canada. Bring $25 and we'll eat family style. See you Tuesday at 7 in Palo Alto.

Please RSVP on Evite or leave a comment so we have a headcount.

Have you Skyped because Skype is more private than most IMs and telephones?

Are you Skype-enabling your web site?

Are you using Skype in your curriculum?

If you answer Yes to any of these questions, please share your story with me for articles on Skype Journal and other publications. Confidences respected. Skype Phil Wolff at evanwolf.

We were off line for a few hours today while some of us were asleep and others were in transit. We ran into our ISP's bandwidth limit much sooner than expected. Funny how exponential growth can surprise you, even when you're thinking about it all the time. Thanks to everyone who Skyped us; we really appreciate your support.

9998290565

Last week I arrived in the UK for some business and pleasure. Julian Bond at Ecademy had also heard I was coming over, so arranged for me to present at their monthly London meeting. I combined two of my favorite current topics. What's your Skype strategy? and What's your presence strategy? It was a fun evening. I was up before Cory Doctorow, a wonderful speaker. Before the event we traded notes with Penny Power, who told me the real story of how Ecademy was founded. Cory's EFF presentation was also so relevant to all us going forward. The abuse of powers around the recording industry are likely to be nothing when compared with telephony as the full disruptive power of VoIP hits. It was interested to see the parallels and to consider what strategies are required so "users" - people in the streets really get it and care. My talk asked "What's your presence strategy?

After the session we had a very yacky dinner with Thomas and Penny, along with Julian Bond and Andrew Widley. Thomas kept priming the pump and both Julian and I fed it with Skype possibilities. By the time he dropped me off I know I had really wound him up. The results were clear the next day. Thomas started a SkypeClub at Ecademy. I think quite a few from the session joined. [Ed. 281 as of 7 June] Why? I believe I found the stories that enabled those that were there to see we weren't talking about telephony anymore. That we were talking about more efficient ways to do business, to add value to conversations and still appreciate a social side.

If you are not familiar with Ecademy it is one of the oldest business networking sites. With members around the world they are concentrated in Britain. There have been 88 London monthly meeting and they now run in many more centers.

Thanks again Thomas and Penny for making we feel so welcome. I'll link to the video when available.

In short, Stuart Henshall.

I met Stuart on the metablogging circuit a few years ago and we hit it off. If you haven't met him, he's tall. Towering. But he's also suave with a mild drawl and a relaxed corporate finish. Stuart and I started blogging about the then-new Skype about two years' ago. We egged each other on, trying to peel away the layers of ideas embodied by Skype the software, the network, the people. I pulled off to work pretty much full time on the 2004 presidential election and, eighteen months later, came up for air. This winter when Stuart launched Skype Journal, I was shocked. Because it was the obvious move and Stuart was clearly the perfect person to do it.

Stuart is a critical thinker, an insightful writer, and natural blogger. He sounds like his blog posts. He's a skilled and agile facilitator, great with small groups. His depth in marketing, knowledge management, IT and telecom, and enterprise strategy are an excellent fit for Skype Journal. His two year's of writing about things Skype is evidence of his persistence and focus. He's a family man, committed to his own work-life balance; dozens of our meetings are cut short for time at home. And he has an honesty and personal integrity that make it easy to do business and be friends, even in difficult situations.

Why this mash note? You should know a little more about the man behind the scenes.

And I really haven't told Stuart to his face how much I appreciate the chance to be part of this new venture. Thanks, Stuart.

Stuart's in London this week. If you see him, pour him a pint for me.

Has anyone else had trouble commenting? I had a problem today, I couldn't comment on the comments left on Skype Journal as it automatically referred my post to http://dsbl.org/listing?67.180.17.83 a DSDB distributed sender blackhole list. Apparently, this is a problem with my service provider Comcast and not the Skype Journal. Although I wonder if it is also something to do with MT-Blacklist the spam filter that is installed. If you have had trouble and had a similar and unexpected "rejection" could you let me know. Thanks.

One month today! Thank you for your support, comments, trackbacks and help on developing the Skype Journal. We are enjoying it and getting a buzz from the rapid growth and learning curve we are on. So how are we doing? We had 5,461 hits yesterday served over 12,000 pages and now exceed 40,000 hits per day and 1,000,000 per month. I pulled this chart from Alexa. Is this good or bad? It's not big blog stuff yet. Still from our perspective it feels good, and the growth trend is up.

Our focus remains on building traffic keeping it interesting and reaching Skypers. Phil Wolff joined Bill and I during the month adding another perspective and we will be adding others.

We also get the inquires; "How does Skype Journal make money?

The answer is it doesn't at the moment and longer term for the founders is not sustainable. We see the investment short-term is worth the cost for:

I could do with some help or suggestions from Safari readers. This blog renders fine in Firefox (everyone should use it) and IE, but alas many of my favorite Safari readers will have problems with the right column. Those little drop down links seem to be the problem. Help gladly and solutions gladly accepted! Otherwise it will be "try something else" next week.

Stuart has a knack for getting new people into blogging. He just IM’d me with the title Skypeosphere. While yesterday I posted about the stars, he says it is really the Skypeophere we want to help evolve. Well I’m still coming to grips with the blogosphere and I’m excited to be part of this exciting new venture. “The Skype Journal”. I am thrilled, flattered and excited about the possibilities this vehicle provides the Skype Community. I feel lucky to be a part of it.

I began exploring Skype options and opportunities when Skype was in diapers six weeks after birth. My first impressions formed back in 2003 haven’t changed: Skype will create a revolution in how we communicate and do our work. I felt the return of the same “heady” feelings I had back in the late 70’s and early 80’s participating in the Personal Computer revolution. I just had to be part of this Skype revolution too.

In the past couple of years I have tried to help shape the future of Skype products as a member of the Skype closed beta forum where I had the thrill of testing pre releases such as Conference Calling, Multi-Chat, SkypeOut, the API and a few I can’t mention yet. 
I have worked to nurture new users through dealing with their issues on the Skype Support Forum. Got labeled with the tag, “Super User” and Top Ten Poster.
As the CEO of Qzoxy Software Inc, a developer the first Skype Presence Server and other Skype API opportunities, I will have to watch that my biases do not flow into my writing here. Keep me honest if you see it happen.
Stuart and I have many ideas to develop and deliver content that will help expand your Skype experience. Thanks for being here.

Good Skyping…

When I began to think seriously about turning an interest in Skype into a more focused blog I immediately began thinking about who I could collaborate with, and who would be committed to the Skype community.

I’m delighted that Bill Campbell is joining me in building the Skype Journal. Bill and I bridge two worlds of Skype, the forum and developer world and the blog world. Bill has done as much technical testing on Skype as anyone. Other than a few of the Skype programmers there is no-one more knowledgeable. Together

we have had many discussions on the Skype API, and the opportunity it presents for new products and solutions. We will be talking the Skype API in the coming weeks.

I’ve also come to enjoy Bill’s focus on quality and testing. It’s easy to provide anecdotal evidence and opinion. It’s often more relevant to look into the facts more deeply. Thus we plan on “tests” and we plan on asking readers and users to point out the things we may be missing.

We’ve naturally been collaborating on Skype for many months. Both of us have built a global network of friends and colleagues using Skype. We hope to introduce some of them to you over the coming days, weeks and months.

Please join me in welcoming Bill to the Skype Journal.