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Will Microsoft buy Ebay? Why should MSFT swallow EBAY? July 27, 2006

Posted by deminvest in ebay, growth stock, investment, MSFT Microsoft stock, Single stocks, stock I own, stocks.
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If Bill Gates was still doing business it would have already been done. Microsoft should take advantage of EBAY’s very low stock price to take sudden world leadership on:

1) Auctions

2) Payment Systems

3) VOIP 

There is also a funny coincidence:

MSFT has 31.10 B$ cash and

EBAY has a market cap of 34.45 B$ and 3.35 B$ cash

So if MSFT wanted to buy EBAY cash it could do it to the dollar, because it would use its cash and EBay’s cash. Of course this is just fantasy, because Microsoft should pay a premium between 10% and 15%, but both companies produce such amounts of cash that even a few borrowed billions would be repaid really fast.

So MSFT could afford EBAY easily. But would antitrust have a problem with that? Not really. The problem with MSFT is that it dominated software industry. What EBAY sells is services, not software, so antitrust should not have to complain about the “Big Deal”.

I hope we agree that MSFT could buy EBAY, but why should the software giant do so?

1) Ebay is growing fast, much faster than Microsoft. The combined company would have a great growth rate.

2) Microsoft is chasing Google on investments in Internet technology. Buying Ebay, MSFT would take the lead in fields like Auctions, Payment Systems and VOIP where Google is trying to catch up, but can’t.

3) EBAY is a huge advertising spender; it is Google’s best customer. Shifting part of that flow of money toward MSN would help it grow bigger and stronger on behalf of GOOG and YAHOO

4) MSFT could mix its instant message system with Skype, making the combination of the two the most powerful and fastest growing communicating community in the world.

5) Paypal could be used as the main system to buy software online.

6) MSFT and EBAY are both companies with record of generating profits and cash forever. The combination of the two would be a growing money machine.

 7) Eh Eh… Least but not last they should do the deal to make me and other proletarian EBAY stockowners happy with a juicy premium!

Comments»

1. retirein - July 27, 2006

IT SOUNDS LIKE A WIN-WIN SITUATION. LET’S SEE IF MSFT GOES FOR IT – AND PAYS A HIGH ENOUGH BUY-OUT PRICE FOR EBAY.

2. ashwin0003 - August 29, 2006

Point 3.

If EBAY’s ads are being posted on MSN then it wont increase EBAY’s customerbase as well as google does. Fact still remains that google is better at sending new customers to EBAY than MSN purely based on the customerbase of google.

But owing both would mean that there would be a drastic amount of savings on advertisements but it would also mean wastage of advertisement space on MSN.

Read this post a little late but I think I make a valid point.

3. deminvest - August 30, 2006

i think you are right. If Ebay decided to put most of its advertising on Google, it is because they are the best at sending customers to EBAY for the money EBAY spends. The problem is that GOOGLE is using part of the money developing services that challange Microsoft’s Office and Ebay’s Paypal.

Anyway if Microsoft decides to buy EBAY, EBAY’s management can’t do much about it, because MSFT has the cash to buy out the stock on the market and with a premium over market’s price.

4. ashwin0003 - September 3, 2006

Hmmm.
Was thinking about the losses of Google. Considering Microsoft’s policy of total domination I think the possibility that Microsoft might actually buy Ebay might be higher than what I think.
But Google also has a option of opening its own counterpart to Ebay, say a GBay. It might not be enough to amass a resonable share in that market but it would atleast cripple Ebay a bit.

Hehe couldnt resist calling it GBay.

5. deminvest - September 4, 2006

GBay sounds great! 🙂

So great that I tried to buy the domain name. It would have been a better investment than any stock… unfortunately http://www.internic.net tells me it is taken 😦 :

gbay.com registrant:

Glacier Bay Seafood and Meat Company Inc

8167 Cole Pkwy

Shawnee, KS 66227

US

6. deminvest - September 4, 2006

I think the only reason why Microsoft has not bought Ebay so far, is the fact that Bill Gates spends more time on charity than MSFT lately.

7. ashwin0003 - September 7, 2006

Hehe poor guy.
Some big guy donated a lot and now he will b ridiculed unless he does so too.

8. deminvest - February 8, 2007

A few numbers that may be useful, specially if we update them in the future.

PayPal has 133 million users now
skype has 171 million users
ebay has 222 million users

9. Yahoo is a fake target: Microsoft wants Ebay! « Democratic Investments by the people for the people - May 5, 2007

[…] I already wrote that MSFT should swallow EBAY […]


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