Investors dump eBay on takeover rumor

Ebay shares slumped by 5pc in early trading yesterday after reports the online auction company was in talks to buy Skype and could pay as much as $5billion (Ј2.7billion) for the internet telephony company. The two groups are understood to have been engaged in exclusive talks for several weeks, although that period of exclusivity is due to expire in a few days with an agreement far from certain.

The future of Skype has been the subject of much speculation in recent weeks, with companies including News Corporation, Microsoft and Yahoo believed to be keen on a tie-up with the market leader in Voice over Internet Protocol (VoIP) technology that allows PC users to make free telephone calls, reports Telegraph.

According to Reuters, independent industry analyst Jeff Kagan said a deal between eBay and Skype would represent a major strategic shift for eBay.

"This would be a big move away from the auction business for eBay and could be a sign of a change in strategy for the company as the telecommunications industry begins to explode again," Kagan said in an email.

An eBay-Skype combo could allow eBay to more tightly knit its market of buyers and sellers. But Devitt said that, over the long run, a Skype-eBay combination could play a major role in telecommunications, building a critical mass of users over a number of years, just as it did in online auctions.

"What's to keep eBay from becoming the de facto voice over IP provider, just because it seems outside their core business?" Devitt said.

Last month, in an interview with Reuters, Skype co-founder Janus Friis shrugged off suggestions Skype may be acquired by bigger rivals, such as Google Inc.