eBay Acquires Skype for $2.6 Billion

Confirming rumors the two companies were in talks, eBay on Monday announced it would acquire Internet telephony provider Skype for $2.6 billion in cash and stock, with another $1.5 billion contingent on performance. Skype will be used to facilitate communication between eBay's buyers and sellers.

The move marks a major strategy shift for the ten-year-old company and a dramatic departure from past acquisitions. However, with eBay's stock price stagnant for much of the past year, eBay is looking for ways to restart growth as its core business matures.

Skype will also see integration with PayPal, allowing its 54 million users to more easily pay for calls. Skype's reach in 225 countries will additionally help to expand eBay's services in new markets.

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"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 Zennstrom, 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."

Zennstrom and other Skype co-founder Janus Friis will remain on in their positions. Zennstrom will report to eBay CEO Meg Whitman and join eBay's senior executive team, the companies said.

"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," said Whitman.

The deal is expected to close in the fourth quarter of 2005.

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