EBay Announces Loss After Skype Over Valuation Charge

Internet auction giant eBay has today announced it made a substantial loss on the third quarter, mainly as a result of its erroneous overvaluation of Voip provider Skype which it acquired some two years ago. The brand reponsible for the eBay auction platform has taken a charge of $900 million to reflect the over payment, which has led to a fall in core profits over the period.

The world’s biggest online auction site reported a loss in the region of $940 million for the third quarter of the year, as a result of it taking a charge of $900 million against the overpaid value of the internet telecomms service provider. In real terms, profits for the period would have increased 53% on the year previously, if not for the charge against excess paid for the Skype brand.

Nevertheless eBay has still performed above analyst expectations for the period, particularly with revenues up to $1.89 billion, a third growth on the same figures for this time last year. The company bought Skype back in 2005 for just over $2.5 billion, a price it has now conceded was probably too high.

Skype provides Voip phone services, a technology that allows telephone conversations to be transferred over the internet rather than through the traditional global telecomms infrastructure. As a pioneer in the market it has become instantly recognisable with its service across the world.

It generates revenue by selling talk time at significantly discounted rates to customers looking to phone outwith the Skype Voip network, such as those looking to phone BT landlines or mobile telephones from their account.

Meanwhile, eBay have said this is the first time they have shown a loss in over eight years, since halfway through 1999, and that its decision to acquire Skype was still beneficial, despite the over generous price valuation.

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