Editor's Note: This is a bonus story from James Altucher, whose commentary usually appears only on RealMoney , where it was published at 1 p.m. EDT Thursday. We're offering it today to TheStreet.com readers. To read Altucher's commentary regularly, please click here for information about a free trial to RealMoney.


According to The Wall Street Journal and the New York Post this morning, eBay ( EBAY) is in talks to buy Skype, a voice-over-Internet protocol (VoIP) telephony company, and the price could be as high as $5 billion. Skype has been in talks before, supposedly with News Corp. ( NWS) for $3 billion, but nothing has ever worked out. This, to me, represents a dramatic shift in eBay's strategy and an interesting evolutionary step in the Internet world.

eBay's last major acquisition, its purchase of PayPal, directly facilitated the service it offers on its auction site. Although companies often pay lip service to the word "synergy" when making an acquisition, it's hard to think of a more synergistic play than an auction site buying a company that makes purchasing easier.

Buying Skype, however, would be the first purchase by eBay that opens up an entirely new revenue stream -- pay-per-call Internet telephony. Similarly, Microsoft ( MSFT) last week bought Teleo, a small player in VoIP, and Google ( GOOG), with its new Google Talk service, allows a degree of telephony, albeit only at the computer-to-computer level right now. With Google and Microsoft, however, there are more synergies through which people can use their phone to conduct searches, play games and use other services offered by both companies.

What's clear is that while the major telcos are continuing to consolidate while they deal with billions of dollars in debt, the fast-growing, great balance sheet Internet companies are making a land grab on VoIP. Small-cap companies that might rise in response include 8X8 ( EGHT), Net2Phone ( NTOP), deltathree ( DDDC) and IDT ( IDT), which is in the process of buying Net2Phone.

I think the battle between Microsoft, Yahoo! ( YHOO), Google and eBay is only just beginning in the VoIP sector. It also underlines that "Internet" plays now are not easy to categorize. They are not tech plays, not media or content plays, not commerce plays, but somehow about integrating them all into one platform much in the way that GE, from the 1960s through the '90s, integrated finance, manufacturing and traditional media into a conglomerate made up of "best of breeds" in each sector.

Further underlining this is the fact that eBay is going for Skype at a potential $5 billion cost rather than the "cheaper" 8X8 or Net2Phone, which could be acquired for $100 million to $200 million. eBay is pursuing the No. 1 or No. 2 play (Vonage being the other major player) rather than wasting time on the possible contenders. This is much how Jack Welch always insisted that GE would buy only the No. 1 or No. 2 player in each category, rather than buying cheap and trying to integrate expensively.

Whether or not eBay succeeds in its bid for Skype, it's clear that a new day is beginning for the company. The move is the first sign that it recognizes that it can no longer put its cash to work as successfully in building its main business, which is mostly mature, and it's looking for other ways to generate return on equity.

Unlike when dot-com companies were making wildly ambitious acquisitions in the late '90s (think Excite buying AtHome), my guess is the seasoned management team led by Meg Whitman has laid the groundwork for this move. The flip side is, could Whitman be feeling "corporate fatigue," particularly after flirting with the idea of moving to Disney, and is she now looking for things to spice up her time at eBay? The company's shares dipped on the news this morning, and I'm not 100% bullish on it like I am with other Internet plays, but I do think a buy-the-dip strategy will work here.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider 8X8, Net2Phone and deltathree to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
At the time of publication, Altucher and/or his fund was long deltathree, although positions may change at any time.

James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and Trade Like Warren Buffett. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback; click here to send him an email.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there from TheStreet.com.