String of Tech Acquisitions Leave Few Raised Eyebrows

Of the recent string of tech company acquisitions – Oracle’s takeover of Siebel, eBay’s acquisition of Skype and HP’s Peregrine buy – none are hugely surprising. Siebel has looked vulnerable for some time as it has faced ever-stronger competition from a raft of hosted CRM players, notably but also RightNow, salesnet and others. Besides, there isn’t the same appetite for big-ticket, enterprise-wide CRM projects today that originally brought Siebel its success.

Skype had been rumoured to be an acquisition target for some time, as it had grown very popular very fast but lacked the deep pockets it needs for its next stage of expansion (it could have considered an IPO but the market for IPOs could be better). Possible acquirers could have either been more traditional carriers like Verizon or BT looking to boost their VoIP market share – though that would have been a very brave move as it would surely have meant risking the cannibalisation of their existing voice revenues – or the big and wealthy dot-coms like Google, eBay or even Amazon. [Image: Skype founder and CEO Niklas Zennstrom.]Founder_niklas_2

The biggest surprise, in fact, is the price Skype managed to attract from eBay – $2.6bn up-front with potential for a further $1.5bn in performance-related earn-outs. Skype generated just $7m in revenues in 2004, and the company anticipates that it will generate just $60m in revenues in 2005. It may have 54 million members in 225 countries and territories, and be adding 150,000 users a day, but most of those users use the service for free. The hope that it will be able to turn more of those users into revenue – revenue that makes the $3bn-plus price tag worthwhile – is a very big gamble indeed on eBay’s part.

Type: White Paper


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