Ebay to Acquire Skype for $4.1B

Ebay Inc. is in the final stages of sealing an agreement to buy Skype, the free & low cost provider of voice calls over the internet for an amount close to $4.1Bn.

EBay said it plans to pay $1.3 billion in cash and $1.3 billion in stock for the Web communications company. It would make a further payout of up to $1.5 billion by 2008 or 2009 if financial targets are met, giving the deal a total value of up to $4.1 billion, executives of the two companies said.

Bay is renowned for an Internet business model linking millions of buyers and sellers, but its core U.S. market is maturing.

Skype’s revenues are estimated to be only about 50 million to 70 million euros, but it has raced to the lead in the booming voice-over-Internet market, which is being aggressively targeted by online powerhouses such as Yahoo, Google and Microsoft.

Skype, whose software allows consumers to make free or low-cost phone calls anywhere in the world via the Internet, would be the biggest acquisition so far for 10-year-old eBay. It tops the $1.5bn that eBay paid in 2002 for online payments company PayPal. This year PayPal is on track to become a $1bn operation.

Skype, which is based in Luxembourg, offers a free service when calling other Skype users. Charges apply when Skype users connect to traditional telephones.

In just two years, Skype has attracted 54 million members to its free Web-based calling service. At current growth rates, it could double in size again within roughly a year.