eBay's Still Trying To Figure What To Do With Skype

EBay's first quarter financial report, announced Wednesday, indicated the auction company is beginning to deliver on its new drive to improve overall customer experience, but the firm's Skype VoIP unit continues to stand out like a sore thumb, because it hasn't delivered much in the way of synergistic value.

While eBay cited Skype's "strong growth trajectory" -- it added 33 million registered users in the quarter along with impressive revenue growth -- eBay chief executive John Donahoe indicated the company could sell Skype if it can't deliver synergies to eBay's core auction business.

"Let's see if they (the synergies) exist," Donahoe said, according to media reports. "In the meantime, we're building a great business."

Indeed, Skype has been "a great business" dominating the VoIP business with nearly 310 million registered global users. But it's been a disaster for eBay, which overpaid for Skype and hasn't contributed much directly to eBay's auctions. EBay took a $1.4 billion charge related to Skype's operation last year.

Donahoe, who took over the helm at eBay earlier this year, named longtime eBay executive Josh Silverman in February to head up the Skype unit beginning March 24.

Another eBay acquisition -- PayPal -- has become a major contributor in the company's auctions. In its first quarter financial report, PayPal's electronic payments revenue jumped to $582 million -- an increase of 32%. PayPal has proven so central to eBay's business that the company is preparing to roll out a plan to guarantee PayPal purchases up to $20,000.

In its quarterly report, eBay said the company's net income reached $460 million on $2.19 billion in revenue. The company said more than one-half of its revenue came from overseas business, a reflection of global customers taking advantage of the sinking U.S. dollar.

Donahoe took over last month from Meg Whitman, who remains a director of the company while she works as co-chairman of John McCain's presidential campaign.

In January, Donahoe outlined a series of broad changes for eBay and the early returns as contained in Wednesday's financial report indicated they were already beginning to bear fruit. "We're serious about making eBay easier and safer to shop," Donahoe promised back in January.

While some sellers have grumbled about the changes, frequent buyers have hailed eBay's planned change to its feedback system, which will eliminate sellers chance to leave feedback on buyers. Sellers can still be dinged by buyers, but buyers like the idea that they will be able to complain about a seller without the seller retaliating.

Donahoe also raised eBay's net income and revenue forecast for 2008 predicting sales of $8.7 to $9 billion and earnings between $1.70 and $1.75 a share.

"We had some good early progress," Donahoe said, according to the Reuters news service. "We still have a lot to do. But I think we are going to make a lot of progress."