ACC 12 - eBay sells Skype

http://www.economist.com/businessfinance/displayStory.cfm?story_id=14376414

Summary
This article was about eBay, an online auction site selling 65% of its internet telephone service, Skype. Skype was not purchased by the founders of this site who left eBay, as some would expect, but by another group of investors. $2 billion cash was paid even though eBay claimed it was worth $2.8 billion in total. Skype was bought four years ago by eBay for $3 billion in order to let the users of eBay communicate better. Many online shoppers eventually stopped using the time consuming eBay and instead bought things at the set price, causing the company’s revenue to drop and leading to the selling of this “bad investment”.

Connections
Skype was sold because of eBay suffering a decline in revenue for the first year in a while. There was some confusion with the cost price of this asset because it was bought for only 2 million while eBay claimed it was worth more. This could be because only 65% of the telephone service was being sold. This article also has a connection to the principle of conservatism because of eBay having to estimate the price of 65% of Skype while making sure it was fair.

Reflection
EBay only sold Skype because of the decline in revenue caused by less people using the site to auction things. The drop in revenue could have been because of the recent economic crisis or that people are too lazy to bid and buy the things at the set price. Either way, I think eBay should have waited longer to see if the revenue increases instead of being so quick to make their decision based on the results of just one year. Keeping this telephone service means that it would be easier for users of the site to communicate and therefore will attract more people. Even more users of the site could be lost because of the selling of Skype.