Thursday, December 01, 2005

More poker references...

I formally forgive Henry Blodget for any of his past indiscretions... he's someone who gets it. Sorry Om, you don't. Here's Henry's perspective:

"WSJ's gadget titan Walt Mossberg reviews Skype 2.0 and predicts it is ready to blast into the mainstream. Along these lines, I spoke with an experienced Internet CEO yesterday who runs two small companies, both of which are Skype-only, neither of which has a single land-line phone. Skype is doing what it needs to do to keep VOIP synonymous with Skype (a strategy whose wisdom is nicely illustrated by the power of the equations "Google = search," "Kleenex = tissue" etc), and as long as it can keep doing so, eBay looks smart. What most observers missed about the Skype acquisition, in fact, was that the price eBay paid was irrelevant.

"The outcome for Skype is likely to be binary: home run or bagel. In the bagel scenario, eBay will lose 100% (or 5% its market cap). Although not inconsequential, companies have made riskier bets (Time Warner, for example).


"In the home run scenario, meanwhile, eBay will make at least 10X. (I don't want to rush to hyperbole here, but this is not a small market opportunity we're dealing with, and the idea that the leading global VOIP player could someday be worth 1/5th of Google's current value, 1/3rd of Verizon's current value, or 1/2 of Yahoo!'s current value is not far-fetched.) Quibbling about whether eBay should have paid $1 billion, $2 billion, or $4 billion, therefore, is a waste of time."

3 Comments:

Anonymous Jeffrey said...

If the price that eBay paid was really irrelevant, why wasn't the purchase price infinity dollars?

5:33 PM  
Blogger Ro said...

you could ask the same question about Yahoo's purchase of Alibaba. Similar acquisition price for similar revenue stream. Arguably Skype has more potential as a global leader than Alibaba has in China alone...

6:12 PM  
Anonymous Anonymous said...

Wow, infinity dollars??? I don't think I've heard an argument like that since grade school. I bet my dad can beat up your dad.

10:46 AM  

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