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Big eBay Users Shun Skype

eBay (EBAY - Get Report) chief Meg Whitman, whose Web site lets people buy everything from DVDs to boats, has plenty of selling to do.

Whitman is due to address investors Thursday morning at a Credit Suisse First Boston conference in Phoenix. With Wall Street already concerned about eBay's growth, the CEO now faces criticism from a group of big eBay users who are miffed over Whitman's latest strategic stroke.

In October, eBay acquired closely held Internet phone company Skype in a move Whitman said would "create an extraordinarily powerful environment for business on the Net." But that message hasn't resonated with some of eBay's biggest sellers.

"Skype doesn't give me a capability that I already don't have," says Jonathan Garriss, executive director of the Professional eBay Sellers Alliance, a group of about 900 high-volume eBay sellers. "It's not something that is going to change the way that the eBay sellers in our group are going to run the business."

Garriss, who says his information comes from informal conversations with members, says many high-volume eBay users won't sign up for Skype because they prefer to communicate with customers via email. eBay stresses that the acquisition serves purposes beyond matching users of its Web sites, but the sellers' comments underscore the challenges eBay faces in integrating the phone service with the rest of its operations.

Lingering concerns about eBay's growth prospects and the hefty price tag for Skype -- $2.5 billion plus earnouts that could push the tab as high as $4 billion -- have hammered eBay this year. Its shares have dropped 20% even as rivals Google (GOOG - Get Report) and Yahoo! (YHOO - Get Report) have soared.

eBay's third-quarter sales jumped 37% from a year ago to $1.1 billion, but the 30% rise in the value of goods sold on eBay's sites marked the smallest year-over-year increase in at least two years. Yet shares of eBay fetch a multiple of about two times its price-to-growth rate for 2006, which is higher than both Google and Yahoo!.
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