More on Prices and Information: Ebay and Skype

Lynne Kiesling

Even though Skype proves that anyone can sell phone service and is being courted for acquisition, the stock of its main suitor, eBay, fell 4% today on the news of the potential union.

J.P. Morgan weighed in on the possibility, saying it thinks the inclusion of voice over Internet protocol, or VoIP, technology such as Skype’s could help eBay quickly improve customer service, which has been a concern of late. …

Assuming Skype is operating at breakeven and that the deal price is in the $2 billion to $3 billion range, the firm estimates the transaction would dilute eBay’s earnings by 4 to 5 cents a share in fiscal 2006. …

J.P. Morgan also pointed out that VoIP isn’t eBay’s core competency, although the company has done well integrating past acquisitions, and that the market is likely to shape up to be highly competitive due to low barriers to entry in the business and the presence of other large players such as Vonage.

Hmmm. This tells me that the customer-service-enhancing effects of broadening their business scope to include Skype may not be worth it. Is there anything else it should be telling us?

4 thoughts on “More on Prices and Information: Ebay and Skype

  1. To improve customer service, Ebay would not have to buy the corporation, just license the technology.

    The downside is that someone would have to answer the phone, which is not something that Ebay has ever done. Customer service costs money and would cut in to profits. Ebay, Amazon etc have done just fine without customer service, why add it now?


  2. I suspect they are thinking about real-time auctions with voice bidding, traditional auctions mediated by computer. They could also set up real-time answers to questions about the merchandise, especially for short and real-time auctions, better access for handicapped customers and sellers, that sort of thing. As you say, they could just license the technology, but that doesn’t get them what they want, which is control over who gets that tech. They don’t just want to use the tech, they want to prevent Christie’s or Amazon from using it.

  3. It would cost in the hundreds of dollars to develop an VOIP system. I think eBay has too much cash and not enough ideas on how to spend it.

    As a shareholder, I am just hoping they don’t start providing customer service. Never works.


Comments are closed.