Auction powerhouse eBay posted a Q3 loss of roughly $936 million dollars, making it the second time in the company’s history that it’s reported a loss. It’s not all doom and gloom, though, considering that the company claimed a $1.4 billion charge to write down its purchase of VOIP provider, Skype. Take away the Skype purchase, and eBay more than doubled its earnings per share compared to last year.
Ah, the Skype purchase. Was it too much? At $2.6 billion, did eBay overpay? Yes. The $1.4 billion Q3 write-down was made up of a $900 million internal devaluation of Skype plus another $530 million paid out to shareholders in lieu up to $1.7 billion in possible performance-based incentive payments.
Despite these current setbacks, eBay sees Skype as a long-term investment according to CEO Meg Whitman.
"’Clearly we are disappointed in the impairment charge,’ EBay Chief Executive Meg Whitman said in a conference call.
Whitman said executives had focused too much on trying to grow Skype’s revenue and profit at the expense of quality.
‘There was not as much focus on delighting the user’" said Whitman, who added that EBay planned to invest more to improve the service. ‘Skype is a great business with a long-term potential.’
Whitman also said EBay planned to spend more to improve its auction site, attract new buyers and entice existing ones to buy more often. The company also plans to cut the fees it charges sellers to list items."
As for Skype, the new MySpace partnership will likely help to boost sales.
EBay posts $936-million loss [Los Angeles Times]