Was eBay buying Skype the worst ever tech deal?

5th Dec 2009 | 08:00

Was eBay buying Skype the worst ever tech deal?

Auction giant can still get some cash back from sale

Was Ebay's historic Skype acquisition the worst deal in the history of the PC industry? Maybe not, but it's got to be on the shortlist. Dr Faustus negotiated himself a better contract.

First, let's consider the price. $2.6billion (in cash and shares) is a lot for any company to shell out, even for something as then-exciting as Skype and a share in the fledgling VoIP revolution.

Next, factor in the fact that if Ebay ever had a clue why it wanted Skype in the first place, we never saw it.

PayPal for $1.5billion? Sure. It's now the standard method of buying and selling on Ebay proper – that one makes sense. Skype? We didn't even see the much-mocked idea of buyers calling sellers to ask questions come to fruition, never mind anything that justified the exorbitant price.

No wonder Ebay has been trying to sell it on, but what exactly does it have to sell?

In a twist of fate that must have led to at least one former contract lawyer filling in a fast food job application form, we found out that Ebay had bought Skype, but not the key peer-to-peer technology behind it, which was still owned by the software's original developers.

To put this situation into some sort of context, it's the equivalent of Ebay having one wish and spending it on a lifetime's supply of tuna, but failing to persuade the genie to hand over a can opener.

But wait, that's not all! Just in case there wasn't quite enough salt poured into its already gaping wound, the moment Ebay finally managed to wash its hands of the whole messy business by finding a buyer for the service, Skype's original owners popped back up and hit the online auction house with a lawsuit, finally squirting actual blood from the emaciated cash cow's poor, withered udders. Right into Ebay's sobbing face.

What I'm trying to say here is that, firstly, I think this deal could probably have gone a little better.

Secondly, if there are still any giant corporations out there that disagree with me, and which honestly believe that urinating away billions of dollars on something as obviously foolish as the initial Skype purchase could be seen as a good investment, well, you're in luck. I hereby offer my services as a professional remora.

Happy to help

For one month only, you can get frustration, public mockery and all the angry shareholders you've ever dreamed of for one easy payment of $1billion. Order today to ensure disappointment!

I promise that it'll be the worst money you've ever spent, ensuring that anything else you do in business will be mere static.

Why would anyone pay for that? Well, wouldn't you like to go to bed knowing that your worst decision is behind you? You can't put a price on that kind of peace of mind, but luckily I can – and I'm waiting for your call! Do it now and I'll even throw in my special money-back guarantee – an absolute guarantee that you will never, ever get your money back!

In Ebay's case, however, there's a chance that its terrible decision might eventually pay off. Assuming it can get past the lawsuit issue, it stands to make a couple of billion back when the sale goes through. It would also be good news for Skype, which would finally be able to reengineer its missing piece of technology, embrace the developer community (something that it's largely failed to do over the last few years) and continue being the VoIP world's only known name.

More big deals to come?

After all, when was the last time you phoned someone from an IM client? It will be interesting to see how many more unbelievably big deals are struck in the future. In most cases, it seems that companies such as Google and Yahoo have spent their fortunes and not received much of a return on their investments.

Anyone who put together a $1billion bid for Facebook must be breathing a sigh of relief that it didn't go through now that the platform has largely lost the world's interest.

Only Twitter remains as a tech-world darling that the big online corporations might consider buying a piece of, just in case. For everyone else, it's time to stop thinking in terms of billions.

Millions, yes, fair enough. But when you're buying technology rather than talent, you tend to find that the original inventors cash out as soon as possible, usually in a thoroughly grumpy mood, leaving the service you've invested in to die on the vine. Even corporate support often seems like too much to ask.

Personally, I always try to avoid services built to 'flip' (to be sold off for megabucks) in favour of ones from companies such as 37Signals that seem prepared to keep rolling.

Nothing appears to get in the way of a good service more than too much money becoming involved too quickly. Except for bankruptcy, obviously, but that's a much less fun problem to dream of having.

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First published in PC Plus Issue 288

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