eBay buys Skype
Sale price: $2.6 billion
Here's an idea scenario for eBay (EBAY) back in 2005: A customer wants to buy a vintage owl macrame kit off a seller in Utah, but first decides to consult with a sheik in Dubai and, later, shows off the handiwork over webcam to a salaryman in Tokyo.
Our ridiculous idea here may make more sense than eBay's ill-fated purchase of Skype.
Yes, people loved the idea of free or cheap Internet phone calls and Web chats with users around the world. But what's the synergy? How does the purchase fill a need?Plentym of people asked that at the time, and eBay never seemed to have an answer. One wonders if it pulled the trigger on the $2.6 billion deal just to beat out other bidders, as though the company was just another vintage Beanie Baby (tag still attached!). eBay eventually had to wash its hands of the deal and take a writedown. Skype then took steps toward an IPO. But the saga doesn't end there, since the IPO never happened. In May, despite having its own Internet telephony capability built into MSN Messenger, Microsoft (MSFT - Get Report) jumped in at the last minute and acquired Skype for $8.5 billion, 32 times its operating profits. It is the largest such acquisition ever made by Microsoft. With Microsoft paying as handsomely as it did, one has to wonder if Skype -- despite being a popular and profitable venture -- might still prove to be the worst deal two companies ever made.