eBay, the online auction giant, is doing a bit of Spring cleaning.

On Monday, it announced that it had sold StumbleUpon, a content discovery service it purchased for $75m in May 2007, back to its founders and a group of venture capitalists.

And then yesterday, following rumors that it was looking at selling online VoIP leader Skype back to its founders, eBay announced that it was spinning Skype off and would be taking the company public in 2010. eBay acquired Skype for a rich $2.6bn in 2005 and was forced to write off nearly $1bn of that amount.

Why the moves by eBay? Put simply, unlike PayPal, which eBay acquired in 2002, neither StumbleUpon or Skype was a good fit with eBay's core business.

Many looked at StumbleUpon as a bizarre acquisition for eBay when the deal was first announced and under eBay's umbrella, StumbleUpon basically stagnated. No synergies were ever realized between the companies. Skype is a successful business, with over 400m registered users and $551m in revenues in 2008. It looks poised to continue its impressive growth; eBay's projections have Skype earning $1bn in 2011. But it too offered few synergies.

eBay's president and CEO, John Donahoe, described the Skype spin-off and IPO in honest terms:

Skype is a great stand-alone business with strong fundamentals and accelerating momentum. But it's clear that Skype has limited synergies with eBay and PayPal. We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential.

He explained that the Skype divestment will enable eBay to focus on its core businesses: ecommerce and payments. Some investors seemed to approve of that message, sending eBay's stock up in afterhours trading.

Obviously this is good news for eBay and for StumbleUpon and Skype. eBay gets back to basics and StumbleUpon and Skype get new life as independent companies. That's probably the way it should have been in the first place.

So is this the beginning of a trend? PaidContent's Rory Maher suggests some other 'ill-considered acquisitions' that could lead to sales, including Bebo, which was the subject of such rumors in the past.

I personally believe there's another possible trend to watch for: fewer acquisitions overall going forward. Boom and bust cycles are not new to the business world but this last one has been especially painful on so many levels. A lot of people suggest that the world has changed and that things won't be the same again anytime soon. I think there just might be something to this and there's a good chance companies will be far more conservative going forward when it comes to M&A activity, even when the global economy rebounds. After all, so many companies have been burned by big acquisitions and that's not something easily forgotten.

Obviously fewer big acquisitions would be bad news for many startups and their investors. But it's also good news since a more realistic market for M&A could give startups a greater incentive to build the next big standalone companies of tomorrow.

Photo credit: Dru Bloomfield via Flickr.

Patricio Robles

Published 15 April, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (3)



Ebay's board of directors simply cannot see that Ebay is a ship without a rudder wandering aimlessly from wanting to become a major retailer to wanting to become a liquidator of end lots and discontinued items and buying every shiny object it sees along the way (Meg's folly - Skype and Stumbleupon)!  Its core business is helplessly floundering under the weight of ridiculous policies and manipulation - this kind of mis-management has been steadily losing Ebay sellers/buyers and sales!  What was once an invincible monopoly in online auctions is now a mediochre selling venue!  The major problem that holds Ebay back is EBAY!  When will the board of directors come to their senses and axe the present management in favor of a management team that is experienced in selling on the internet and has a track record to prove it!   Handing a multi-billion dollar company over to incompetents and watching them run it into the ground is just being dirt stupid!  Anyone investing in this hapless company has the that same mentality!

over 9 years ago


Trevor Lott

I'm so not amazed at these business being returned to the previous owners. I believe that Ebay fell foul of the golden rule of never forgetting why you are successful in the 1st place.

Now there are so many new competitors who Ebay just cannot fight against.

 One company do almost all that Ebay achieves but for only one pound an ad, no premium rate call charges no extra VAT nothing just one pound. How can Ebay fight aginst that with all their overheads? In marketing terms like for like companies such as Ebay just will not be able to compeat and will loose significant market share .

If we are to survive in the new leaner market place, companies like this can't fail to make an impact ...and grow whereas the older dinasours with so much  cost, are already starting to fail and starting to selling off their assets  

over 9 years ago

Alec Kinnear

Alec Kinnear, Creative Director at Foliovision

Ebay is an awful, expensive platform. I do as little shopping there as possible (occasionally for weird camera stuff, eBay has things that are not available elsewhere). I do no selling there anymore as you are not adequately protected as either buyer or seller (how the policies could be that badly botched is a mystery).

Paypal is terrible as well - but at least seems to have some reasonable people in the house trying to improve.

Skype all-around is an outstanding service. No wonder they are floundering in the eBay ecosphere.

eBay management deserve razzies for taking an industry leader and turning it into pickpocket infested flea market.

over 9 years ago

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