Thursday, September 08, 2005
Is Meg Pulling a Carly?
When Carly Fiorina announced her plan to have Hewlett-Packard—one of the all-time great, if fading, technology franchises—buy commodity PC-maker Compaq Computer for $25 billion shortly before 9/11, she told HP employees in a horribly prescient email that the deal marked “a historic day.”
She was right about that, because in retrospect it marked the beginning of the end for Carly Fiorina as the restorer of HP’s faded luster.
Even worse for Carly is that she was wrong about nearly everything else in her email, including the guts of the problem, as this excerpt makes clear:
Our competitors are going to use every chance they can to discredit it: They'll say we'll lose focus, they'll say we won't be able to execute, they'll say we won't be able to make the tough decisions fast enough.
I believe we will prove them wrong.
Four years later, Carly was out.
Now, today, we read that Meg Whitman, the toy company executive who guided eBay up one of the greatest growth paths in world business history (and I mean that sincerely—no sarcasm at all), is making a $2 to 3 billion overture to buy Skype, the Swedish-based internet phone company, from the ex-Kazaa creators who founded it and the VCs who funded it.
According to the online Wall Street Journal story,
…the person familiar with the situation said that eBay is keen on adding services that make it easier for its customers to buy and sell goods online, as it did when it acquired the electronic-payment processing service PayPal in 2002.
Now, to give Whitman her due, PayPal was a homerun deal for eBay. And not just a barely-over-the-glove-of-the-leaping-outfielder type of home run, but a Manny Ramirez, screaming-over-the-light-poll-at-Fenway type of home run.
PayPal not only fit like a glove with eBay’s business of acting as middle-man to online buyers and sellers, but eBay gave PayPal’s payment system instant critical mass that made it an internet standard.
Today PayPal generates one quarter of eBay’s revenues, and Whitman deserves all due credit for the deal.
According to the WSJ story,
EBay's massive and technology-literate user base of 157 million could prove willing adopters for Skype software. And those customers — which are often segmented into niche communities — could use the software to communicate with like-minded enthusiasts. Skype's software has been downloaded 162 million times, and has 52 million users world-wide.
Well, I guess.
But my partner uses Skype and so does my brother-in-law…and while they like it well enough, I run my business on instant-messaging and wireless email. Telephones are used for company conference calls and other, less frequent, human interaction—and I suspect the core eBay user acts the same.
I mean, how many of eBay’s users actually communicate regularly via phone to run the nuts and bolts of their business? How many want to start?
As for the real behind-the-scenes stuff going on here, I don’t know much more than what I’ve read.
I know that Meg tried out for the top job at Disney and backed off after getting mixed signals from the Disney people—probably a very wise move, considering the blood-sucking, Machiavellian DNA of the Walt Disney Company.
So why she wants Skype is beyond me.
I suspect, however, if she gets it by paying $2 to 3 billion for a company with an estimated revenue base (the Skype financials are not public) of $6 to 10 million and no apparent fit to the eBay operating model, then it could mark yet another “historic day” in the annals of technology-related acquisitions.
As Compaq did for Carly.
I Am Not Making This Up
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.
Posted by Jeff Matthews at 8:56 AM