Slashdot Mirror
Ebay Rumored to be Buying Skype
JDStone writes "Rumor has it that trusted sources from The Wall Street Journal say Ebay is interested in buying Skype. Later after the announcment, Ebay Inc. shares fell 4.3 percent."
← Back to Stories (view on slashdot.org)
Rumor has it that trusted sources from The Wall Street Journal say
Um, why the hell the contorted syntax? Why not just say:
The Wall Street Journal is reporting EBay is in talks to acquire Internet-telephony company Skype for $2 billion to $3 billion, in a deal that would represent a dramatic shift in strategy for the online auction giant. Bloomberg has the details for those without a WSJ account.
Geez, Taco. Grow up and act like a real editor.
Here's how it really goes.
Company A thinks acquiring Company B might be a good idea.
They look at the market value of Company B, and how much revenue Company B is expected to generate over x number of years, as well as how much synergistic value Companies A and B would have if they merged.
Company B looks to be a tremendous value, so Company A would do well to buy them out, right?
The problem is that Company B's shareholders are well aware of their value, and they are not going to be bought out on the cheap, particularly if they can find other suitors to make competing bids. And federal regulations require that acquisitions be announced to the public, so there's plenty of lead time for other companies to offer bids.
The amount that Company A has available to bid for Company B is determined by the estimated value of Company B, post-acquisition.
In these situations, almost all of the additional value that Company B would bring to Company A ends up going to Company B's shareholders in the bidding, and it becomes an almost break-even proposition for Company A. And many times it's even a losing proposition.
Therefore, Company A's stock price goes down, and Company B's stock goes up, regardless of what industry. Almost every time.
I should've quoted the WSJ story. Here's the first two paragraphs:
"EBay Inc. is in talks to acquire Internet-telephony company Skype Technologies SA for $2 billion to $3 billion, according to people familiar with the matter, in a deal that would represent a dramatic shift in strategy for the world's largest online auction site.
"The talks are in a sensitive stage and could fall apart, according to one person briefed on the matter. Luxembourg-based Skype, whose software allows consumers to make free telephone calls around the world using Internet technology, has been in active discussions with other technology companies, and none has led to a deal."