eBay's ( EBAY) PayPal unit agreed to acquire VeriSign's ( VRSN) payment gateway business for $370 million in cash and stock. The deal, expected to close in the fourth quarter, will allow eBay to expand its payment processing business. eBay, which owns the world's largest Internet auction site, expects the VeriSign unit to generate about $100 million in revenue and 20% pro forma operating margins in 2006. VeriSign also will provide security software to eBay. "This acquisition allows PayPal to give our customers more choice in payment services and to grow our merchant services business even more quickly," said Jeff Jordan, the president of PayPal, in a statement. The deal comes as the two Internet companies are pursuing new directions. eBay last month agreed to acquire voice-over-Internet phone company Skype for as much as $4.1 billion in a bid to restart flagging growth. VeriSign, meanwhile, appears to be adding heft to its content businesses. The moves come less than two weeks after VeriSign warned of a
third-quarter earnings shortfall, driven largely by a weak performance at its content services business. In particular, VeriSign cited a revenue shortfall in the mobile content area due to higher-than-expected seasonal churn and requirements for marketing mobile content in Europe. At least two analysts lowered their forecasts on VeriSign ahead of the Sept. 29 warning, citing similar issues in the company's Jamba! mobile content business. Earlier Monday, TheStreet.com reported that VeriSign had agreed to buy online news aggregator Moreover Technologies, which provides real-time content to services such as Ask Jeeves and Microsoft's ( MSFT) MSN network. Sources close to the deal say it is valued at around $30 million. On Friday, VeriSign said it had acquired Weblogs.com, a site that provides people with alerts when blogs and Web sites have fresh content posted to them, for $2.3 million. VeriSign, based in Mountain View, Calif., will provide financial guidance about the impact of the PayPal transaction when it closes. There are about 140 workers at the VeriSign unit, all of whom will be offered jobs at either PayPal or VeriSign, a spokesman said. In late trading Monday, VeriSign added $1.25 to $21.29. eBay was flat in postclose action after rising 56 cents during the regular session.