The Skype Chickens Come Home To Roost at eBay

Here’s the story: AP: EBay loses $936M in 3Q on Skype charges

Early this month, eBay announced it would take a $900 million write-down in the value of Skype. That impairment charge essentially acknowledged that eBay executives drastically overvalued the $2.6 billion Skype acquisition, completed in October 2005.

"We are disappointed — obviously — by the write-down, and we’re behind in terms of some financial metrics we had originally anticipated," Whitman told The Associated Press in a phone interview. "Moving to new management was completely the right thing to do. I actually feel confident in the business longer term."

Yes, moving to new management would be the right thing to do, wouldn’t it. However, like most failed managers she finds a scapegoat to blame. When you look further at the story it seems that PayPal is carrying the rest of eBay, that their earnings are paying for boondoggles like Skype. Also, it seems that sellers are posting fewer items and fewer items are getting sold on eBay’s core site. This is what happens when a company ignores the fundamentals and chases after pipe dreams.

Of course, they’re wringing every cent out of sellers who’ve remained loyal to the core eBay business, 14% less than this time last year, which was about the time I stopped selling aggressively there and became an occasional seller.

Has eBay "jumped the shark" at this point? I would say yes but it isn’t permanent. Can they make a comeback? I think they can if they make some hard choices, mainly sticking with their core business and improving it and divesting themselves of stupid ideas. If the current management team wants pretty toys like Skype to play with, let them play with investors money in start-up companies rather than affecting the livelihood of many hard working small business people who struggle to make a profit on eBay.

What do you think?


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2008-08-12 20:13:16

Just about the time I started considering being an eBay seller, the first increase in seller fees appeared. I could see where eBay was heading even then, so I got out before I got hooked. I would love nothing more than to create a rival auction website. My model would be the original eBay, and if I just kept things status quo, not raising seller fees and not cutting into profits, I would eventually surpass eBay as the premier auction site.

2008-08-12 20:40:02

Like the title of this article. Yes, I have been hurt by the tightening of profit shareing at ebay. It makes me not want to be a seller anymore. But now that I am selling bigger ticket items the pain is not felt as sharply.

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