Big eBay Users Shun Skype
"People believe that the U.S. market will show some signs of deceleration next year and that international markets such as China won't accelerate fast enough to make up for it," says Martin Pyykkonen, an analyst with Hoefer & Arnett who rates eBay shares reduce and doesn't own them.
Skype, which was founded in 2002, wasn't profitable when eBay purchased it and will dilute the company's earnings for the next two years.
"There really is no obvious connection between the two businesses," said Darren Chervitz, director of research for New York-based Jacob Asset Management, which owns shares of eBay and TheStreet.com (TSCM), publisher of this Web site. "Skype may end of up being a valuable business, but I am not 100% sure it will be because eBay owns them."
With users in 225 countries and territories, Skype has developed a loyal following with very little advertising. Skype claims that its service is the fastest-growing communications application, adding more than 150,000 users per day. It has been downloaded more than 212 million times, according to Skype's Web site.Skype may help eBay compete against rivals such as Google, which is testing an Internet phone calling system called Google Talk. Cable companies including Comcast (CMCSA) and Time Warner (TWX) also have entered the so-called voice over Internet protocol phone market. TeleGeography estimates that the number of U.S. VoIP subscribers rose 400% from a year ago in the third quarter to 3.6 million. Revenue rose 473% to $304 million. Though the gains are impressive, they still represent a small fraction of the overall telecommunications market and many users show no interest in changing from conventional phone service, says Maribel Lopez, an analyst with Forrester Research, who follows the Internet phone market. "At this point, nobody in the VoIP industry has made a good solid case for the value, and the acquisition of Skype by eBay complicates matters," she says.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV