Any time you spend more than $4 billion, it's only natural to experience momentary buyer's remorse. (I'm obviously not speaking from personal experience but hey, I can dream!)

But I've been puzzling ever since eBay decided to break the bank to acquire Skype. The company's paying a pretty penny. There's the original price of $2.6 billion in cash and stock as well as the sundry performance incentives that could add another $1.5 billion if Skype hits certain financial performance metrics.

But did eBay get its money's worth? You only know the answer to these questions years later. Yahoo thought it was getting full value when it paid $5 billion to buy Broadcast.com, perhaps the dumbest deal in the history of the computer business.

Anyway, I use both the free and pay versions of Skype. It usually works fine though it's hardly perfect. Sometimes the latency on the line is unbearable. Other times the person on the other hand says I sound like I'm talking from Jupiter. For all the glitches, I still think Skype offers good value for the price.

But play around some time with the latest instant message audio tools offered by Yahoo, Microsoft, Google and America Online some time. Granted, the person on the other end still needs a computer to communicate with you. But is it so beyond the pale to imagine some will figure out a way to communicate between computers and phones five years from now?

The helmet that Robby Gordon threw at Michael Waltrip was temporarily pulled off the online auction site eBay on Wednesday after bidding exceeded $10 million.

The site ended the auction because it was unable to verify the legitimacy of the bids and because Gordon didn't have the proper documentation showing that he planned to donate the proceeds of the sale to charity, eBay spokesman Hani Durzy said.

The helmet was re-listed late Wednesday night with the assistance of AuctionCause, a company known for helping in fund-raising efforts with experience in prequalifying bidders.

Gordon listed the helmet on eBay on Tuesday and planned to donate all proceeds to the Harrah's Employee Relief Fund, a charity designed to aid Harrah's employees affected by Hurricane Katrina. Bidding was spirited all day and the helmet was listed at more than $100,000.

By Wednesday morning it had reached $8 million and Gordon's representatives began questioning the validity of the bids. By this time, eBay had also taken notice of the high amount of traffic and decided to end the auction.

"That sort of thing sometimes happens on high-profile listings, its what we call bogus bidding — people just bidding with no intention to pay for it," Durzy said. "People sometimes do that because they think it is funny, and it's not."

Durzy said eBay would probably investigate the bogus bids and either suspend or issue a warning against the potential buyers.

Gordon was directed to AuctionCause by eBay, and the company helped him re-list the helmet at a starting bid of $5,000. The auction now has a letter proving that all proceeds will go to the Harrah's Fund, and bidding now requires proof of the ability to pay for the helmet.

"We hope that everyone that submitted a valid bid will do so again," said John Story, CEO of Robby Gordon Motorsports. "Robby has a genuine interest in helping build the Harrah's Employee Relief Fund, and all of us here want to help in any way we can.

"That's why it is so important to re-establish the auction and guarantee that every dollar pledged actually goes to the relief effort."

Gordon threw the helmet at Waltrip after they were involved in an accident during Sunday's race at New Hampshire International Speedway.

After Waltrip wrecked him, Gordon first tried to hit Waltrip's car with his own. He then climbed from his car, walked through race traffic and tossed his helmet at Waltrip. He also used a derogatory term during a television interview when asked about Waltrip.

Gordon was fined a total of $35,000 and docked 50 driver points by NASCAR for the actions.

``The downside is still the considerable high price of oil,'' said Denny Engelman, senior trader at E-Trade Capital Markets in Chicago. ``It will take some time for the effects of that high to work itself through the economy.''

Shares of EBay Inc., the largest online auctioneer and a member of the retail group, dropped as Bear Stearns & Co. cut its rating on the stock. Nike Inc. advanced after reporting first-quarter profit that exceeded analysts' estimates.

The Standard & Poor's 500 Index fell 1.85, or 0.2 percent, to 1236.06 at 9:38 a.m. in New York. The Dow Jones Industrial Average lost 25.64, or 0.2 percent, to 10,616.30. The Nasdaq Composite Index slipped 1.56, or 0.1 percent, to 2158.79.

The Federal Reserve meets tomorrow to decide on monetary policy. Economists surveyed by Bloomberg News predict the central bank will lift the target rate for overnight loans among banks to 3.75 percent.

Crude oil rose from a six-week low on speculation an OPEC pledge to pump at full strength wouldn't be enough to meet demand in the event of another Gulf of Mexico hurricane. Crude for October delivery climbed 2.4 percent to $64.52 a barrel in New York.

Gasoline futures advanced as much as 3.6 percent to $1.85 a gallon. Oil has surged 48 percent in 2005, while gas is up 69 percent.

2005 Performances

Industries most affected by fuel costs are among the worst performers in the S&P 500 this year. Gauges of auto-related and transportation stocks have tumbled 22 percent and 11 percent, respectively, for the steepest declines among two-dozen industry groups. A measure of retailers is down 3.9 percent.

EBay slid 42 cents to $36.68. The company will spend more on investments in 2006 ``as competition is intensifying,'' which may weigh on the shares, wrote Bear Stearns analyst Robert Peck in a report. He reduced the rating on the stock, which slumped 36 percent this year, to ``peerperform'' from ``outperform.''

While energy costs have weighed on stocks amid concern about the economy, more than four-fifths of economists surveyed by Bloomberg expect the Fed to lift its overnight lending rate for an 11th straight time tomorrow. A quarter-point increase would leave the target rate at 3.75 percent.

``Things have slowed down, but it's still positive growth,'' said Owen Fitzpatrick, managing director at Deutsche Bank Private Wealth Management in New York. ``We think they'll raise rates tomorrow, and one more time before year-end.''

Slower Growth

U.S. economic growth slowed to a 3.3 percent annual rate in the second quarter, the Commerce Department reported last month, from 3.8 percent in the first three months of the year.

Nike gained $5.69, or 7.3 percent, to $84.15 for the best performance in the S&P 500. The world's biggest athletic-shoe maker said net income for the period ended Aug. 31 climbed to $1.61 a share as new lines of Shox sneakers increased demand in the U.S. and Asia. Analysts, on average, expected earnings of $1.42, according to a Thomson Financial survey.

Internet auction site eBay has cancelled the sale of a human kidney after it attracted bids up to $US800,000 ($1.05 million) in just a single day.

The kidney was being sold by a 54-year-old US citizen from Missoula in Montana who wanted to use the proceeds to support his family.

The internet site does not permit the sale of human organs and the auction was deleted as soon as it came to the notice of eBay management, the company said.

Another eBay seller tried to sell a kidney in 1999. That sale brought in bids of more than $US5.7 million before the company intervened to block the auction

RANGERS have shut down more than 40 eBay sites selling fake club goods.

They complained to the internet trading giants who then pulled the plug on dodgy sellers.

A club source said: "This is just the start.

"Where people are making money from selling counterfeit goods, we will hunt them down and prosecute them."

Rangers' zero-tolerance stance has made them the scourge of fakers across the globe.

Every day a team uses specialist software to track down club branded goods for sale on the internet.

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They then send off for a sample and, if bogus, they contact police and trading standards.

In the past month, 42 eBay sites have been closed down.

Many were selling homemade DVDs of last week's 3-2 victory over Porto at Ibrox.

Sellers' pages based in Australia, America and the UK were taken off the site.

The source added: "This might seem harmless to some but there's no way a buyer can tell whether he's got something from a 16-year-old geek or someone heavily involved in crime.

"We will keep getting these individual sites closed down. If others spring up in their place, we will close them down too. There is nowhere to hide."

Rangers hold 120 trademarks across 40 countries and goods confiscated already this year have been valued at £5million.

Their success is encouraging other clubs to follow suit.

An eBay spokesman said: "We are absolutely delighted to have been working with Rangers to keep counterfeit goods off eBay.

"We are committed to working with brand owners

Some of you might be doing this, right after you click off the Heartland News web site: checking the latest bids on eBay!

eBay has taken the nation and the Heartland by storm. But, is it good for everyone? 

While the Internet powerhouse has helped some folks cash in on extra money, others, like antique dealers, aren't so quick to log on and start bidding. "He bought it for a dollar and sold that table for $530!" So, there is a market on eBay for old-looking things. Don't ever think what's sitting in your house is junk-- it may not be!" says Jim Prater, as he peers at a glass table that even has a crack in it.

Prater knows firsthand about the advantages eBay customers sometimes see. Besides selling his own items on eBay, he also ships items for his postal customers. In fact, eBay sellers make up 75 percent of his Postal Pal clients.

And it's not just small items Prater ships. His staff found a way to ship a rather-large and old couch.

And if he can't find a box or crate to fit, Prater makes his own. "It never ceases to amaze me what comes in that door," he exclaims.

When Heartland News was at Postal Pal, one man shipped a grill for a 1946Plymouth to someone who bought it on eBay. "I got $100 for this and 60 out of this," says Gary Dahmer.  And he only paid a few bucks for each of these--- which Gary Dahmer calls, "Junk to most people, treasure to others!"

After seeing all of these random items selling so quickly, Prater wonders about eBay’s effects on antique dealers. “That's what's hurting these antique dealers, because they don't have the selection you have on eBay,” said Prater.

But not so fast, antique dealer Alan Pigg has found a way to beat the system.  "When I don't have other things, I may just take something off the shelf and sell it on eBay," said Pigg.He also says eBay is merely a tool that supplements his flea market and antique shop. He recommends others in that business do the same.

Still, PIgg admits, "Something like this may sell for ten bucks here, and we don't have to ship it. We don't have to put forth the effort required in eBay format and I'd much rather sell it here than on eBay!” said Pigg.

That antique dealer also says no matter how popular eBay remains, there will always be a market there for the shoppers who want to see, touch and feel an item they're about to purchase, rather than looking at it on a computer screen.

Alan also says if you do want to sell on eBay, unique and old items sell the fastest. He also claims glassware hardly ever sells!

Federal and state authorities are investigating at least 10 eBay auctions, some Oregon-based, found last week that offered thousands of pills containing pseudoephedrine, the critical ingredient in methamphetamine.

Quantities offered far exceeded new state laws on sales of the chemical.

Three auctions continued to take bids Friday. Three others apparently were shut down either by their owners or by eBay.

Ken Magee, assistant special agent in charge of the Drug Enforcement Administration in Oregon, said the auctions "piqued our interest tremendously."

With Oregon and other states passing laws restricting the sale of pseudoephedrine in recent months, buyers and sellers are finding new ways to obtain it.

"Crooks are becoming more savvy," said Garrison Courtney, a spokesman for the Drug Enforcement Administration in Washington, D.C. "They're realizing, 'Hey, here's a way to go through a keyboard anonymously, make cash and disappear.'"

For at least six months, the DEA has worked with eBay and other online retailers to stop illicit sales of pseudoephedrine, Courtney said. The retailers are trying to develop filters to root out illegal sales while allowing legal ones, he said.

But smoking out criminals in a marketplace featuring tens of millions of listings is difficult, eBay officials said. "It's impossible for us to police that and be 100 percent effective," said Hani Durzy, an eBay spokesman.

He said eBay may soon revamp its policy to forbid all sales of pseudoephedrine.

Until then, the company has yanked individual pseudoephedrine auctions if asked by authorities pursuing investigations, Durzy said. He said he did not know how many auctions the company had ended.

A Tennessee-based blogger tracking the topic called pseudoactivist.blogspot.com said eBay has removed at least 40 auctions involving 500 grams of pseudoephedrine after e-mails urging the company to do so.

Oregon rules approved in April restrict cold medicine purchasers to 9 grams of active pseudoephedrine a month, about the amount in three 24-pill boxes of Sudafed.

As of Friday afternoon, eBay listed at least three auctions for boxes of pseudoephedrine containing 1,000 30-milligram tablets located in Portland. The starting bids were $65.

On Thursday one listing advertised "Pseudoephedrine By the Box or by the Bottle."

EBay officials would not provide any information Friday about the sellers or the buyers of the auctions.

Oregon last year became the second state to require that many pseudoephedrine products be kept behind the counter instead of on open shelves.

Last month, Gov. Ted Kulongoski signed legislation to require prescriptions for decongestants containing pseudoephedrine.

The new requirement must be in place by next July 1, but officials say they may be able to implement it earlier.

Under the law, doctors can prescribe the product over the phone and consumers can get up to five refills in a six-month period.

The founder of eBay Inc. and his wife, both Tufts University alumni, gave the university a $25 million challenge grant to be used for undergraduate student scholarships.

Pierre Omidyar, founder and chairman of eBay (NASDAQ:EBAY), the San Jose-based online auction company, and his wife, Pam, are making the second largest gift Tufts has received in its history. Tufts is in Medford, Mass.

The gift is a challenge grant to encourage donors to contribute to a $200 million endowment Tufts is trying to raise to make it a need-blind school. A need-blind school accepts students regardless of their ability to pay the tuition and offers financial aid accordingly.

The Omidyars have founded Omidyar Network, an investment group. Pierre Omidyar, a trustee of Tufts, earned a bachelor of science in computer science from the school in 1988. Pam Omidyar, who sits on the college's advisory board, earned a degree in biology from the school in 1989.

Schoolchildren across the southeast Valley are raising money for victims of Hurricane Katrina. But Peggy Wojtal's kindergarten class at Risen Savior Lutheran School in Chandler is doing it with a little technical savvy.

School Director Linda Pauley said Wojtal and class parents wanted to find a unique, meaningful way for kids to help, so they asked each child to create two pieces of art. The first represented what they would like to give the people who lost everything. The second was a happy picture.

Now the original pictures are posted on eBay with the proceeds going to Red Cross hurricane relief efforts. advertisement 
 
"It made me feel like an actual artist," said 5-year-old Emily MacKay. Many of the students expressed concerns for the people impacted by the hurricane and said it felt good to help.

"When people buy our art we'll get money to send so they can buy stuff," said 5-year-old Emily Spears.

Opening bids are $9.99. On Friday, several had increased beyond that and at least one was going for more than $100. The auction ends Tuesday.

"I'm just warm and fuzzy about the whole thing," Pauley said.

She said she will happily accept back any artwork from winning bidders to hang at the school.

I recently had the opportunity to chat with Bob Brauer, CEO of StrikeIron, Inc., about the latest phase of his firm's "Web Services Marketplace" offering.  (Q&A published here.) Since the marketplace will serve as a forum for both subscribers and publishers of various services, Brauer evoked the eBay analogy for what he is providing; though he stresses that pricing of services will be fixed, and not auctioned.

The eBay analogy is popular across many disciplines now; Salesforce.com's Mark Benioff evoked it for his company's services, as noted in this post from ZDNet's Dan Farber. Nevertheless, I find the idea of building an ecosystem, which potentially could foster a new class of service publishers, intriguing.  Some folks are running their own businesses off of eBay, for example. I have a friend that makes a few thousand a year buying and selling used golf equipment within eBay.

How does this all fit into the SOA scheme of things?  I talk a lot in this blog about the JBOWS architecture (Just a Bunch of Web Services) that most companies now have, versus fully functioning SOAs. Will having a frenzy of services bought and sold over the open market just add to the confusion?

Two thoughts: Brauer sees StrikeIron's marketplace playing a role in providing services that companies may not have the time or inclination to build. Why reinvent the wheel by having your staff spend time building service components, when you can quickly subscribe to a component, that's been tested and uptime certified, and pay for it on as-used basis? "We are providing, through our partners and ourselves, a bunch of new Web services that you can hook in through your existing SOA," Brauer said. "For example, things like our live tax rates, or our address verification Web service. Different things where it makes a lot more sense for companies to hook into our Web service, rather than having to rebuild and update and gather the data themselves."

The other thought is that if such a marketplace approach does take off, this may push some software vendors to change their models to component delivery, based on a micropayment business model.  This also makes plenty of room for smaller start-ups.

Amazon and others are reportedly in interested in this marketplace concept as well. This could open up a whole new way of doing business.

A San Leandro man has pleaded guilty to charges that he defrauded eBay users in online auctions for rare Mickey Mantle and Michael Jordan sports cards.

In pleading guilty Monday to one count of mail fraud, Michael Gouveia, 40, admitted that he accepted money from the winning bidders in 2002 and 2003 with no intention of delivering the cards as promised.

Gouveia admitted that he had defrauded eBay users of more than $34,000, including a Michigan resident who sent him $7,199 for a 1951 Mickey Mantle baseball card that was never delivered.

U.S. District Judge James Ware will sentence Gouveia in San Jose on Dec. 19.

Let's cut eBay (Nasdaq: EBAY) open. Don't worry -- it's a hearty specimen. As we dig deep into the world's leading auctioneer, we begin to uncover some of the junk that the company's been eating over the years. I'm not talking about that 9-year-old Pez dispenser or some "eBay Live" bumper sticker. I'm talking about the series of seemingly odd acquisitions that the company has consumed since its arrival on the dot-com scene in 1996.

This week's news that eBay was going to be swallowing online communication upstart Skype may have left some investors scratching their heads. Then again, those are probably the same shareholders who were wondering where the company's other purchases fit into the scheme of things.

So let's snap on those surgical gloves, don the goggles, and take a closer look at eBay's brief, yet potent, buying history.

Half.com
In June 2000, eBay acquired Half.com for $374 million in stock. Half.com had been launched just a few months earlier, but eBay was doing the right thing. It smelled a threat and had the clout to extinguish it before it raged out of control.

Half.com was a pretty original upstart that allowed visitors to sell their used CDs, books, movies, and video games on the site. The only catch was that they had to price their wares at least 50% below retail value. Given the product categories, one can argue that this was an even bigger threat to Motley Fool Stock Advisor recommendation Amazon.com (Nasdaq: AMZN) than to eBay -- after all, if folks were hawking used media online, why bother with Amazon? -- but the model itself was more disruptive to eBay's existing business.

To understand why, consider that Half.com was letting its users list for free. It was a breeze to use, too -- just a matter of punching in the UPC, checking off on the product's condition, and setting a low price. Users would then be charged a 15% commission on any sales. In short, Half.com was a seller-friendly consignment service. That didn't sit well with eBay, which had always charged -- and still does charge -- fees for all listings rather than just on sales, to make sure that it got paid on even unsuccessful deals.

At the time eBay made its offer, Half.com claimed to have more than 4 million items available through its virtual consignment shop. That was about the same number of auctions that eBay had going on at any particular time. Half.com had an aggressive affiliate program in place to make sure that it would grow strong virally. But eBay was no dummy. It knew that it could buy its friends -- and its enemies.

PayPal
Two years later, PayPal emerged as enough of a threat to eBay that "Little e" consumed it in a deal valued at $1.4 billion. PayPal was becoming the online payment of choice, and eBay had to do something about it. No, eBay didn't aspire to be a bank. However, it felt as though it would not be getting the most out of its users if they were to scurry off to PayPal.com to seal the deal after buyers and sellers had shaken hands on eBay. Yes, eBay had tried to make the payment system work on its own. It teamed up with Wells Fargo (NYSE: WFC) for its proprietary Billpoint service, but it was too little, too late: Despite integrating Billpoint into the eBay auction site, folks were still turning to PayPal to complete their transactions.

Like Half.com, PayPal also had an ambitious affiliate marketing program in place. But PayPal's was even more effective than Half.com's, since it would provide new accounts with a $5 bonus as well as reward active accounts with $5 for any new account referrals. The end result was that everyone had a PayPal account. The same rationale that worked for eBay against rival auction sites being put out by Amazon and Yahoo! (Nasdaq: YHOO) applied here.

Bidders went to eBay because that's where the sellers were, and vice versa. The same thing happened with PayPal as it became the legal tender of choice in cyberspace. So shortly after PayPal went public, eBay was there. It was ready to turn another foe into a financial contributor.

Craigslist
Two summers after PayPal -- and what is it with eBay going gonzo with the acquisitive plastic this time of year? -- eBay picked up a 25% stake in Craigslist. Once again, the buy was a result of eBay's predatory sense starting to tingle. Craigslist is a free site where users buy, sell, and swap everything from merchandise to rentals, or even pick up a date. Organized by city, it is a pure grassroots marketplace. When eBay secured its minority stake, Craigslist was attracting 5 million unique visitors a month and generating  more than a billion monthly page views.

With a quarter of the value of eBay's successful marketplace transactions taking place in its eBay Motors division, how could the online auctioneer let Craigslist folks move their tired rides for free? Localized features like free job listings may have been a threat to a company like Monster Worldwide (Nasdaq: MNST), and its extensive real estate listings may have turned heads at a place like Homestore.com (Nasdaq: HOMS), but Craigslist was growing to be a real thorn in eBay's side given the growing popularity of its freebie merchandise listings.

Yes, there is plenty of clutter to be found on Craigslist. It would never be a pure replacement to eBay's proven interface. Then again, if bidders started finding what they were looking for on the free site -- and sellers found willing buyers -- the same dynamics that grew eBay into a titan could start nipping at its ankles.

Unlike its two earlier buyouts, eBay didn't walk away with complete control in a potential adversary. All it gets to do is ride shotgun with Craigslist. That's not necessarily bad. It will be able to learn more about Craigslist and gain competitive insight. Its absorbing role may even give it an education if it should ever decide to enter new realms, such as job listings or dating personals.

Skype
So why would eBay pay as much as $4.1 billion for a company that allows people to chat it up in cyberspace for free? Because Skype is a global sensation. Its software has been downloaded nearly 170 million times. And any two Skype-enabled users can engag e in voice communication with their Internet connections.

All that said, Skype produced just $7 million in revenue last year. On the other hand, it raked in most of that amount when it was mostly a free service. Since then, to reach out to those who are not online with Skype, the company has unleashed a pay service to reach landlines and cell phones at a fraction of the conventional cost.

So what's the deal here? It's not as if eBay were AT&T (NYSE: T) or anything close to a telco remnant. What did it stand to gain in owning a good chunk of voice-based online usage? Will it help close auctions quicker if it provides an interface for buyer and seller to talk over the transaction details? Perhaps. But that's certainly not worth the king's ransom that eBay is footing for Skype. Even if Skype's new e-commerce pursuits have it producing $200 million in revenue next year as expected, eBay has to have a master plan in mind.

And it does. Skype got eBay's interest because it was generating buyout interest elsewhere and because all of the major portals were rolling out their own Skype-like audio features on their instant-messaging platforms. Exchanging goods? Exchanging words? It may seem like a stretch, but eBay couldn't afford to let the other Internet giants grow unchecked.

The path to prominence for eBay was dictated by having the masses at the ready. Buying Skype was about securing eyeballs -- and eardrums -- and making sure that even more online users stayed well within the reach of Meg Whitman's marketing whims.

I did it eBay 
Just 39% of eBay's revenues this past quarter came from its flagship domestic-auction business. The company is diversifying in terms of geography and focus. That points to the reality that these are challenging times for the company. But they're also exciting times. Ever since we singled out eBay in the Motley Fool Stock Advisor newsletter three summers ago, the company's shares have risen by 122%. That's a refreshingly beefy return, compared with the 17% that the S&P 500 has mustered in that same time.

So, yes, as we poke around inside eBay, we see a company that has developed an insatiable, if not incredibly tactful, appetite. And you just never know what it's going to devour next. 

EBay said it will pay $US1.3 billion in cash and $US1.3 billion in stock for explosively growing Skype, which will allow eBay to add free web telephone calls to its online auctions. It will make a further payout of up to $US1.5 billion if certain financial targets are met.

The deal will cut eBay's earnings by about a penny per share until the end of 2006 before beginning to boost eBay's profitability, Chief Financial Officer Rajiv Dutta said. Its shares rose 45 cents, or 1.17 per cent, to $US39.07 on Nasdaq.

EBay is renowned for its internet marketplace linking more than 150 million buyers and sellers, who currently exchange about 5 million emails per day. It hopes that offering free Skype calls within eBay will smooth the way for more deals to go through, and let the company charge merchants for calls that lead to sales.

Skype already leads the booming voice-over-internet (VOIP) market, which is seen as a threat to traditional phone companies and is being aggressively targeted by online powerhouses such as Time Warner Inc's AOL unit Yahoo Inc and Google Inc.

Microsoft Corp, for instance, last month moved to build its presence in the internet telephony market with the purchase of Teleo, while Yahoo bought Dialpad earlier in 2005.

But eBay Chief Executive Meg Whitman said that Skype had a considerable head start.

"We think Skype has an enormous lead - 150,000 new users a day - and technology that is generations ahead of where the new entrants are," she said. "And when people are using your brand name as a verb, that is incredibly powerful."

Skype expects revenue of $US60 million this year and more than $US200 million in 2006, but has yet to turn a profit. In two years, Skype has attracted 54 million members to its free and low-cost internet-based voice service and is on track to roughly double in size within a year.

EBay is looking to create a new triad of e-commerce, joining buyers and sellers on eBay, with its PayPal online payment system, and the ability to complete transactions via web phone calls using Skype software, analysts said.

But David Ricci, a portfolio manager with William Blair & Co, said the deal could prove to be a "stretch" for eBay since it appears to fall outside of its core business.

"The motivation for other players is more obvious than it the buying and selling process, Dutta told Reuters by telephone.

Legg Mason telecommunications analyst Blair Levin, formerly the chief of staff to Clinton-era Federal Communications Chairman Reed Hundt, said Skype faces competitive challenges of its own as it moves closer to traditional phone services.

Skype could eventually fall under US regulation governing emergency services that could drive up the costs of adding new subscribers. Also, phone companies are moving fast to add video, data and wireless services to their voice offerings. Skype will have to invest to keep pace, Levin noted.

"While Skye certainly has benefited from first-mover advantage, the competitive dynamic for the kind of service it offers is increasing," Levin said in a note to investors.

Nearly half of Skype's users live in Europe, a quarter are in Asia, and an eighth are in North America, providing eBay with a large audience as it seeks to expand outside of its core North American market.

The deal provides a major payout for Skype founders Niklas Zennstrom and Janus Friis, who also created the controversial file-trading network Kazaa that allows music fans to share music for free. The co-founders plan to stay at Skype.

Opinion: David Coursey thought long and hard about eBay buying Skype before coming to the obvious conclusion: eBay really does have more money than it can use effectively. Oracle's purchase of Siebel Systems is a better deal, though customers will be given many reasons to defect.
 
I have to admit to being initially perplexed when the news about eBay buying Skype reached my desk. For hours, I tried over and again to make sense of the deal, trying to understand what I'd missed. It wasn't until late in the day that it dawned on me: The reason eBay buying Skype doesn't make sense is precisely because it makes no sense. None. Nada. Zilch.

Summed up in a short sentence, eBay has shown itself to be a company of many dollars and little sense. It's hard to imagine the company making back this sort of investment and certainly whatever Skype brought to the table could have been gotten elsewhere for a lot less.

eBay seems to have purchased Skype with the intent of building its VOIP technology into eBay's shopping and auction engine. One analyst told me it was a build-or-buy decision for eBay, which took the "buy" route in acquiring Skype.

eBay wants buyers and sellers to speak to one another. There's also the possibility of live real-time auctions using VOIP. And there's the possibility that Skype will continue to offer a VOIP service independent of eBay's stores and auctions.

The analyst suggested that by purchasing Skype, eBay had somehow missed the bullet of having to support a zillion incompatible VOIP services. That doesn't wash with me, as eBay could have bought some other VOIP company for a lot less money, or merely made an investment in Skype, or just anointed a VOIP provider as its chosen partner with no money changing hands. Actually, I suspect someone would have been happy to pay eBay for the privilege of being its VOIP company.

So, there's no way that adding VOIP to eBay should have cost the between $2.6 and $4.1 billion dollars that Skype is getting. The move can be only explained this way: The company whose auctions are used to set the fair price for so many things doesn't know the value of a dollar. This may actually make sense when you have as many dollars floating around as eBay does. (I can only imagine who Google may yet purchase with its loot).

While I'm aware that Skype has developed a following, until eBay's money truck arrived, I'd always expected a telco to end up acquiring the Skype, but not until competition heated up. Right now, VOIP seems too much in the air to declare winners and losers, but that didn't stop eBay from making Skype a huge winner—and, perhaps, taking them out of the broad market for good.

Skype is a bad purchase for eBay, but since eBay had the money to burn we may never understand precisely how bad.

As for the day's other big deal, Tom Siebel left Oracle to compete with Larry Ellison, had a brief heyday when there was oodles of money floating around, and now is getting his comeuppance from a presumably still-not-amused Mr. Ellison. I can almost hear the gloating as Oracle takes down another loathsome competitor.

The world will now pause, collectively exclaim, "Larry, you're such a stud!" and get on with our business. I hope Larry's ego was properly stroked. Sometimes, I find it almost sad that Larry's egomania and good business decisions so often line up.

Buying Siebel is a good thing for Oracle, especially because Siebel didn't put up a nasty fight. It's also a deal that should have happened a year or two sooner, perhaps thus pre-empting the public execution of PeopleSoft. Had Seibel been purchased first, PeopleSoft would have found itself in waters hostile enough that Oracle could have considered the company effectively vanquished. Or, at least, available later on at a better price.

Instead, it should be fun to watch Oracle try to turn seven different CRM packages from four companies (Oracle, PeopleSoft, J.D. Edwards, and Siebel) into something like a unified product. Given that the customers of acquired companies had the chance to buy Oracle but refused, it will be fascinating to see what sort of deals Oracle is willing to make to in order to keep them.

Oracle's move to roll up much of the CRM business also presents an incredible opportunity to Salesforce.com, SAP and a host of smaller companies. They will doubtless work hard to take advantage of the inflection point Oracle has created. Given the enormity of the support, migration, and development task facing Oracle, I expect its remaining competitors to do well in grabbing some unhappy Siebel, PeopleSoft, and J.D. Edwards customers. How happy can they possibly be?
 

I hate scary movies. Fellow Fool Tim Beyers saw one last week when he penned a piece on the rumor that Motley Fool Stock Advisor recommendation eBay (Nasdaq: EBAY) was relentlessly pursuing privately held Skype, the popular provider of voice-over-Internet-proto col (VoIP) software and services. Now it's time to review that scary movie: The press release that makes the buyout deal official has been released.

eBay will pay $2.6 billion in up-front cash and eBay stock to acquire Skype. The $1.3 billion in cash is half of what eBay had in the bank, so it won't bleed any red onto its debt-free balance sheet. Ah, but there is a "performance-based consideration" (in other words, a bonus) in this deal worth up to $1.5 billion in cash and/or stock. The total price tag could be a whopping $4.1 billion by 2009 -- payable at eBay's discretion.

For its billions, eBay is getting a young company with approximately $7 million in 2004 sales. That sounds bad until you realize that eBay expects its prodigy's sales to increase to $200 million in 2006 -- valuing the up-front deal at 13 times forward sales. No word on how much of that sales forecast is expected to be the result of "synergies" between the eBay and Skype brands.

At first blush, I agreed with Tim Beyers' logic that auctions and phone service go together as well as spinach and ice cream. It's a scary combination, especially when so many high-priced mergers never reach anything near their touted potential.

But I have to say that I've warmed to this deal. Although I find the price out of this world, eBay is acknowledging its core market, Internet transactions, and attempting to provide a platform for communications between its customers and everyone else on the Internet.

This isn't just about eBay and its PayPal subsidiary. It is about a well-known Internet site rolling phone service into its Internet sales and payment package to create a "killer application," set for deployment on some of the Web's prime real estate. This combination could create fundamental changes in the way e-commerce is done. Sure, as a software consultant, I've heard this promise about VoIP technology for years, but I've never seen it delivered. In my opinion, the delivery is finally on its way.

Investors will ask if Skype is really worth $2.6 billion. Since it's rumored that News Corp. (NYSE: NWS) was willing to pay $3 billion for Skype, paying less was probably not an option.

Will eBay make a bundle on this massive investment? The odds aren't exactly in its favor, especially since its competition has begun to plunge into the VoIP world as well. Microsoft recently purchased Teleo, a VoIP company whose services are already integrated into Microsoft Outlook and Internet Explorer. It doesn't share eBay's focus on e-commerce, but it's another choice addition to Microsoft's software portfolio (at an asking price that's been kept under wraps).

Meanwhile, Google (Nasdaq: GOOG) has its limited VoIP offering Google Talk in beta testing, Time Warner's (NYSE: TWX) AOL unit has its own efforts, and so does Yahoo! (Nasdaq: YHOO). That's quite a crowd, and all of the players are known for their well-padded bank accounts.

Until now, nobody's found a surefire formula for making VoIP a regular part of the Internet experience. Will eBay and Skype provide the necessary synergy to give this scary movie a happy ending? It looks like we'll have to wait for the sequel to find out.

Millions of buyers and sellers on the eBay auction website will soon be able to phone each other over the internet after a £1.4 billion technology deal, the biggest in the company's ten-year history.

The American website, used by more than 150 million people worldwide, yesterday confirmed plans to buy Skype, the market leader among a growing number of companies offering software which allows internet surfers to make voice calls from computer to computer.

Meg Whitman, the chief executive of eBay, said: "Over time, we intend to make voice communications a part of the eBay marketplace - a huge step forward in making transactions faster and easier, as well as bringing even more interactivity and humanity to the eBay Community."

She said the details of how Skype will be built into eBay will be worked out "over the next few weeks" but vowed the deal would "redefine online trade and community".

Launched two years ago, Luxembourg-based Skype has 54 million users worldwide and it is estimated it will double in size in a year.

Its software allows users with broadband internet connections to make voice calls to each other without using traditional fixed phone lines. Internet surfers need only speakers and a microphone or headset to use the technology.

The ability to make phone calls over broadband, known as Voice over Internet Protocol (VoIP), is an explosive growth area being targeted by a range of big new media players.

Google, the online search engine company, became the latest entrant to the field last month when it unveiled Google Talk, and both Microsoft and Yahoo! plan to offer rival services.

Low-cost internet phone providers like Skype pose a major challenge to the telecommunications industry as the technology which breaks calls into data packets that get routed over the internet is cheaper and more efficient than the traditional phone system.

Executives of both eBay and Skype believe the availability of "click-to-call" services on the website will help convert eBay surfers into buyers. Typical UK eBay users spend nearly two hours a month on the site and view 280 pages, and the auction website hopes the ability to make instant voice calls will reduce the "friction" involved in buying and selling. That ability to communicate instantly will be further enhanced when Skype adds video calling to its software.

Both companies said yesterday that further performance-related payments could take the eventual value of the Skype deal to £2.2 billion by 2008-9.

Not all industry watchers are convinced about eBay's latest acquisition. Mark Main, a technology analyst with Ovum, said he considered the deal "far-fetched" and suggested eBay could have found cheaper ways to improve its internet communication abilities.

"EBay could have developed its own sophisticated messaging and communications platform, or even bought one, for far less money than it is paying for Skype," he said, adding: "If eBay is mainly paying for Skype's user base and brand, that makes this a risky investment."

However, eBay has defied critics over its technology strategy before. In 2002 the company was accused of veering into competition with the banks after it bought PayPal, an electronic payment system, for just under £1 billion.

However, the ability to pay sellers via a click of a button proved popular with web surfers and thrust eBay into a commanding position in the online-payment market.

The UK version of eBay, launched in 1999, is currently attracting nearly 11 million visitors a month. More than £2 billion worth of goods were sold on the UK site last year and the company says British sellers are offering three million items at any one time.

While many eBay visitors buy and sell the odd item, some British surfers now make their professional living from the website. EBay says 10,000 people, including small businesses, use it as their main source of income in the UK.

Technology shares in America rose on news of the eBay announcement. In another landmark technology deal, software company Oracle said it would buy rival Siebel Systems for £3.2 billion.

What is going on at the internet auctioneer QXL Ricardo? In the past year alone, shares in the UK's rival to eBay have registered a twenty-fold rise, giving the group a stock market value of £110m. On a two-year view, its shares have risen nearly fifty-fold. And yet QXL is barely profitable. In fact, it will be lucky to see its turnover top £10m this year.

Although the company's performance has improved from the days when it used to be valued at below £10m, the main reason for this extraordinary performance seems to be due to the workings of the stock market and not the underlying business.

Two rival investment companies now control 53 per cent of QXL. Florissant, backed by Icelandic money, has 27 per cent and last year tried to buy the group with a bid of 1,400p a share. That failed and soon after an Israeli consortium called Izaki Group emerged on the scene and quickly built up a 26 per cent shareholding. This stake-building by the duo greatly boosted QXL's shares. In fact, Izaki is believed to have paid up to 3,000p for some of its stock back in May year.

So far, so good. At 3,000p QXL was worth £50m, a racy valuation but not insanely so. However, since then shares in the group have once more doubled and closed at 6,268p on Friday. Market professionals say this further jump is the product of an attempted bear raid on QXL that went badly wrong. After Izaki finished its stake-building, many traders took out short positions in the stock - they sold shares they did not own, convinced they would be able to buy them back at a lower price some time in the future. Their view was that QXL was overvalued.

However, the bears got it badly wrong and shares in the online auctioneer simply held their ground. When it was time for the raiders to close their positions, they found stock was scarce in the market and soon it was they who were paradoxically driving QXL shares higher as they scrabbled to buy them back. In City dealing room parlance, this is called a bear squeeze.

On 9 June, the online auctioneer pretty much confirmed this had happened. It put out a statement saying its soaraway share price was "due to technical market issues not related to the operations of the company". QXL shares are likely to continue to rise as long as there are still bears looking to buy back stock to close short positions. How long this will go on for and how high it will take QXL's valuation is anybody's guess.

But on a fundamental basis, the company is simply overvalued at present. Even if the group gets back its most profitable division - its Polish unit, the ownership of which is the subject of litigation in the former Eastern Bloc country - QXL's shares will still be far too expensive.

SCREEN TEST

Word has it Personal Screening will soon be making its way from the lightly regulated Ofex market to AIM. The UK's leading supplier of approved self-test medical kits is expected to announce its move within the next month. Personal Screening's innovative kits allow patients to test themselves for an array of disorders from home, including diabetes, high cholesterol, prostate problems and a range of sexually transmitted diseases. They are sold in a wide range of high street outlets and by mail order and generally cost between £10 and £20.

CLEARING UP OPERATION

Finally, yet more bullish news is on the way from United Clearing this week. The group, which provides outsourcing services to the mobile phone industry, has won another contract and the deal is likely to be announced as early as today. United Clearing has secured Globalstar Europe Satellite, the world's most widely used handheld satellite phone provider, as a customer.

The coup will come hot on the heels of similar deals with Orange, Hutchison 3G Ireland and O2 Ireland and should mean that the company's full-year results, expected next month, impress the City. Brokers forecast United Clearing to unveil a pre-tax profit of £1m and tip this to soar to £1.6m in 2006. Although the group's shares have soared by 70 per cent since its float last year, there seems to be plenty more upside in the stock.

Adamind looks like a winner

Adamind, the multimedia messaging software group, which floated in February, will post maiden interims tomorrow and investors can expect to see evidence that it is growing strongly. Led by Shailendra Jain, pictured above, it is the world's leading supplier of adaptation software which ensures multimedia messages and e-mails are compatible between different types of mobile handset.

Therefore, Adamind is benefiting greatly from the ever rising number of mobile phone users who are moving from simply text messaging to sending picture messages and downloading content such as news and music clips. Its figures should boast a doubling in first-half sales, putting it on target to achieve turnover of more than $6.5m (£3.5m) for the full year.

Analysts expect Adamind, which was spun out of Emblaze Systems and enjoys the Dutch electronics giant Philips as a major shareholder, to be profitable at the pre-tax level next year. And there should be little stopping it from further profit growth thereafter. More than 90 mobile phone networks, including the US giant Verizon, use Adamind's software, giving it a 40 per cent share of the global market. All looks to be in place to make the group a big winner from the fast evolving multimedia messaging sector.

Ebay was in the final stages late Sunday of sealing an agreement to buy Skype, the fast-growing provider of voice calls over the internet, for more than $2.6bn, according to a person close to the situation.

The deal, which ends a flurry of takeover approaches from other internet and media com-panies, could cost as much as $4.1bn, if Skype hits certain performance targets between now and 2008.

By integrating Skype with its own software to bring voice calls to its online market, Ebay would be able to ease communications and increase the level of trust between its buyers and sellers, according to the person close to the deal.

That could grease the wheels of the auction and general e-commerce site. While not planning to compete head-on with traditional telecommunications companies, Ebay is also thought to see the acquisition as a way to jump into new markets, including charging fees to companies that use the voice service to generate sales leads over the internet.

However, reports last week about the possible price for the transaction, along with Skype's largely undeveloped business model and the increasing competition in the so-called voice over internet protocol market, have already raised concerns about Ebay overpaying for Skype. Under the terms of the potential deal, Ebay is understood to be preparing to pay $1.3bn, in cash, along with another $1.3bn worth of stock. It would also pay $1.5bn in performance-related benefits as part of an earn-out that would keep Skype's managers at the company until 2008.

The potential deal echoes Ebay's $1.5bn purchase of PayPal, the online payment company.

As a network that links many private buyers and sellers around the world, Ebay already acts as a giant communications company, handling millions of e-mails a day, though it does not have a real-time communications network to let its users contact each other to agree deals or settle disputes.

However, Skype's business is thought to be far less developed than PayPal was at the time it was bought. PayPal had already gone public and was generating around $200m in annual revenue when Ebay bought it, while Skype, which was created in 2002, is estimated to have revenues of €50m-€70m.

The high price for the relatively undeveloped company, which is run from London, reflects the competition from other big internet and media groups, including Yahoo and News Corp, as well as the lofty valuations that internet com-panies have reached since the PayPal deal.

It also reflects the success of Niklas Zennström and Janus Friis, Skype's founders, in being among the first to attract a big following for an internet voice service.

More than 50m people have downloaded the company's software, which can be used to make free calls between computers over the internet. Users can also pay to make calls from their computers to a traditional telephone line.

Like Ebay, Skype has talked of integrating its voice service into online commerce and other applications on the internet, making it a feature of many different services.

Yahoo Inc.'s newly acquired Alibaba.com unit will focus on building up several key businesses, but has no near-term plans for acquisitions or a public offering, as it aims to be China's Internet leader, top company executives said on Saturday.

Yahoo agreed last month to pay $1 billion and give its China business unit to Alibaba in exchange for a 40 percent stake in the Chinese Internet commerce specialist.

The new firm will now focus on building key areas, including business-to-business e-commerce, consumer auctions, search, e-mail and instant messaging, Alibaba founder and Chief Executive Officer Jack Ma told Reuters in an interview.

"For the moment we need to invest in our existing businesses," said Ma, a fifth generation resident of Hangzhou, an historic city known for its natural scenery.

"The China Internet market isn't very mature yet, so we need to invest our money in developing it," the former English teacher said on the sidelines of an Internet summit.

Ma said Alibaba's first priority would be to work with its own resources, and a second would be to form partnerships with other players. He dismissed outright acquisitions as a priority for the near term.

Alibaba generated a relatively modest $68 million in cash revenue last year, an amount that Ma said he expects to double in the current year. Its core product, a business-to-business marketplace, handled $4.5 billion in domestic and international transactions.

Its newer online auction TaoBao service, which competes in China with eBay, handled $200 million in the second quarter of 2005.

Ma said his company is profitable, but said that boosting profits is not a key priority just now.

"For the moment, it's more important to invest in the China market and not worry about profits," he said. "For us, it was more important to prove we could be profitable, and not how much money we could make."

BUILDING SHARE

Prior to the Alibaba deal, Yahoo's main China business was the local search site 3721.com, which it bought two years ago for $120 million. Since then, it has competed with local search leader Baidu and other smaller players.

More...

eBay shares fell 4 percent yesterday, after a report on the alleged negotiations with Internet-telephony company Skype has been published in The Wall Street Journal.

eBay's stock price fell $1.53 close to $38.93 per share after The Wall Street Journal mentioned an estimated price of $2 to $3 billion for the acquisition.

eBay and Skype made no further comment on the matter
other than calling all the emerged information rumors and speculations.

As Skype has 53 million registered users and according to its representatives, more than 2 million people use Skype at any given moment, some analysts say this prospect doesn't hold up.

"I would be shocked and dismayed if eBay made this move to get into the telephone business," said Maribel Lopez, a telecommunication analyst to Forrester Research. "A bunch of companies [including Google, Yahoo! and MSN] already offer voice as part of instant-messaging."

"Even if having integrated voice communication between buyers and sellers is a good thing, I'm not certain that eBay would need to acquire the capability," stated David Edwards, analyst for American Technology Research.

Rumors abound that eBay, the world`s biggest and most successful online auction house, will buy out Skype Technologies, an Internet-based telecommunications group.

Both companies have steadfastly declined to comment on the speculation, even as major newspapers went ahead and published the report. Investors, however, were sufficiently spooked by the speculation that eBay could offer anywhere between $2 billion and $5 billion for the Luxembourg-based company that only started business two years ago, they were quick to sell off shares in eBay. While eBay has established itself as the grande dame of online-based businesses that has revolutionized the way consumers buy and sell used as well as new goods, many investors believed that acquiring Skype would go far beyond the core operations of eBay. As a result, eBay`s share price tumbled nearly 4 percent to close just above $39 Thursday.

Of course, rumors of a buyout are nothing new for Skype. The company became fodder for similar talks with Google only a month ago, which the company has flatly denied. Still, it is a testament both to Skype`s undeniable top position in the Voice over Internet Protocol market on the one hand, and growing fears among analysts that other bigger companies want to get into the VoIP business now too, which could hurt Skype`s prospects in the long run.

Over the past two weeks alone, both Google and