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Wednesday, September 2, 2009

$125 million when the deal is concluded.


eAbout the Sale
eBay will receive about $1.9 billion in cash and a note for $125 million when the deal is concluded.
It's expected to go smoothly because the buyers have the money and the deal is not subject to financing conditions.
eBay president and CEO John Donahoe called the purchase Thrifty's In
Coupon use had been declining since 1992 as consumers found less need for or some embarrassment in using them. However, as the economy worsened, frugal became cool and their popularity grew.
Use of electronic discounts and coupons more than doubled in the first half of 2009 compared with the same period last year as overall coupon use rose 23 percent, according to coupon-processing company Inmar
. They now account for more than 3 percent of all coupons used, up from roughly 2 percent in 2008.
While they still represent a small part of the total coupons used, they have strong potential -- growing quickly and providing a new way for shoppers to stretch increasingly tight budgets.
"It does take some significant outside forces for people to wake up and pay attention to the savings opportunities available to them," said Matthew Tilley, director of marketing
for Inmar.
On a recent shopping trip to the grocery store, Englebert tucked a clutch of offers under her tattooed arm. Besides the store's printed circular, there were manufacturers' coupons she'd gotten by e-mail and coupons she'd bought on eBay (Nasdaq: EBAY)
. Using in-store sales and coupons, she bought 14 items -- including macaroni and cheese, meat and other items -- for a grand total of $5.98, saving $24.88.
Englebert said she spends about five hours a week hunting for coupons -- checking her favorite blogs for the hot deals of the day, searching manufacturer Web sites for special promotions and finding groups on Facebook or through Twitter feeds, among other tools. She even hits eBay, where something like a $5-off coupon may not be of any value to someone who isn't going to use it but is worth the 99 cents she might pay for it.
High-Tech Penny Saving
Users can print digital coupons from Web sites or e-mail, but many are entirely electronic. They can be uploaded to a store's loyalty card or arrive on a cellphone as a promotion code or image. There are also iPhone applications, handheld devices in stores and screens built into grocery cart handles that alert shoppers to deals in stores. Retailers continue to try new formats.
Electronic coupons offer the same benefits for retailers as any discount program: driving consumer traffic, building loyalty, increasing sales and attracting new customers.
They also eliminate printing costs, reduce paper waste, can be updated more quickly and have higher redemption rates than their print counterparts.
Coupon aggregators such as Coupons.com and Cellfire
say online coupon users tend to skew younger and more affluent than the traditional coupon user. Cellfire, for example, says 60 percent of its users are between 18 and 35.
However, technological hurdles remain in syncing electronic coupons with checkout systems and in preventing counterfeiting and hacking.
Many Internet coupons are designed to limit customers to only two per computer, but some users try to find ways around that.
Newer coupons can have serial numbers or a user's name built in so any abuse can be tracked, said Charles Brown, cochair of the coupon council for the Promotion Marketing Association and vice president of marketing for NCH Marketing Services
.
Learn as You Go
However, companies are still figuring out the new dynamics of managing the array of coupons and how fast they can spread.
Marsh Supermarkets had to halt a recent Facebook deal
offering $10 off a $10 or more purchase as the coupon spread much further and faster through the social networking site than the Midwest grocer had intended.
"It just went everywhere. We did not anticipate that," company spokesperson Connie Gardner said. "We would not have issued it if we had known."
Most notoriously, KFC faced traffic jams and overwhelming demand this spring at several restaurants and ultimately offered rain checks to cope with unanticipated demand for free grilled chicken meals offered in a coupon posted on TV talk show host Oprah Winfrey's Web site.
Overall, electronic coupons lack the reach of print because consumers must seek them out -- as opposed to finding them in the mailbox or on the front step, Brown said.
Experts say both electronic and traditional print formats are likely to grow, though it will be a while before they match the all-time peak in coupon use of 7.9 billion in 1992. In 2008, consumers redeemed just 2.6 billion coupons of all types.
"When airplanes were invented, trains didn't go away. When TV was invented, radio didn't go away," Brown said. "Various medias work together and reach consumers at different times." a great deal. "We've acted decisively on a deal that delivers a high valuation, gives us significant cash up front anad lets us retain a meaningful minority stake with talented partners," he said when announcing the sale.
"We're spinning off from eBay to become an independent company once again," Josh Silverman, whom Donahoe tapped to turn Skype's fortunes around, wrote on the Skype blog.
The Buyers
The buyers consist of an investment group led by Silver Lake Partners. Other members are Index Ventures, Andreessen Horowitz and the Canada Pension Plan Investment Board.
Danny Rimer and Mike Volpi, both at Index Ventures, were among Skype's earliest Board members and supporters, according to Silverman's blog post.
Silver Lake is a private investment firm focused on technology with $13 billion under management. Andreessen Horowitz is a new venture capital (VC) fund formed by former Netscape founder Marc Andreessen and Ben Horowitz in July. Andreessen will continue as chairman of the online social networking creation site Ning and will remain on the boards of Facebook and eBay.
Index Ventures is a VC that invests primarily in the information technology and life sciences sectors.
eBay's Troubled History With Skype
Skype never quite fit into eBay's plans and was often a thorn in its side. First, there was the money -- in addition to the initial purchase price, eBay shelled out another $530 million to Skype's founders under an earn-out deal, according to Barron's Technology Trader.
"The original plans when eBay bought Skype included integrating Skype flawlessly into eBay for sales and for the auction and classified sides," Peter M. Zollman, founding principal of the Advanced Interactive Media Group (AIM), told the E-Commerce Times. "That really hasn't happened."
eBay CEO Donahoe made that plain when announcing the Skype sale. "Skype is a strong standalone business, but it does not have synergies with eBay's e-commerce and online payments businesses," he said.
There has been a lot of infighting at the two companies, Laura DiDio, principal at ITIC, told the E-Commerce Times. "eBay's buying Skype has generally proved to be a bad deal," she pointed out. "eBay has spent a lot of time writing down the value of Skype."
One possible indicator of the infighting is a comment Skype's Silverman made in his blog post about the deal. "It means we're back to being a fully independent company again but with a new group of owners who believe passionately in our mission and in the ability of our team to deliver on it," he wrote.
The Best-Laid Plans
eBay had initially planned to issue an IPO for Skype this year. That idea took a hit when eBay got into a dispute over intellectual property rights with Joltid, a company created by Skype founders Niklas Zennstrom and Janus Friis.
Joltid claims it owns the patents to one of Skype's technologies and threatened to yank the technology, leading to a lawsuit in a UK court and to Skype pouring funds into trying to create a workaround.
Despite the ups and downs, Donohoe remained bullish about Skype's prospects, saying that a $2 billion valuation would be too low.
A Diamond in the Not-so-Rough
He may be right -- Skype's purchasers may have got a good deal. The service remains popular. The iPhone's Skype application saw 4 million downloads by July, five months after it was launched in March, according to Peter Parkes, writing on the Skype blog.
Also in July, Skype released the final version of Skype 2.8 for Mac. Last month, it got another boost when AT&T (NYSE: T) said it might authorize VoIP capabilities on the iPhone for use on its 3G network. The carrier said this in response to the ongoing Federal Communications Commission investigation into Apple's (Nasdaq: AAPL) refusal to approve the Google (Nasdaq: GOOG) Voice app for its app store.
"Skype remains the leading VoIP service and, as such, it has a substantial amount of value, particularly when positioned competitively against Google Voice," Rob Enderle, principal analyst at the Enderle Group, told the E-Commerce Times.
The Joltid lawsuit won't amount to much in regard to the purchase, he said. "If the investors were smart, they worked in contingencies to anticipate this," Enderle said. "These aren't stupid people."
Skype offers considerable growth and revenue potential, AIM Group's Zollman said. "There are no direct major competitors on the horizon, and Skype is relatively young in terms of revenue and growth."
At press time, eBays stock prices were down 47 cents, or 2.12 percent, to $21.67.

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