Google’s answer to Bill Gates: BUY EBAY! February 8, 2008Posted by deminvest in ebay, goog, Google, growth stock, Internet stocks, investment, MSFT Microsoft stock, nasdaq, Nasdaq stock, risky investments, stock I own, stocks, Yahoo, YHOO.
Google could fire back to Microsoft: EBay is there: a cash generating machine, with its belly full of sitting dollars, without a CEO (Meg is going to step down) and unable to pursue the easiest strategy of a market leader on three key markets:
2) Online payments
3) Online telephony
Let’s start with numbers:
Ebay’s market Cap is only $37.67B. If Google had to pay a 50% premium on that it would cost $45 B to swallow it.
Ebay has $5B cash that Google would seize. Google has $14 B cash.
Google should then borrow $26B to buy Ebay paying cash. No big deal considering the fact that Google has EBITDA of $6.05B a year, growing fast and EBay has EBITDA of $2.61B, also growing fast. The combined company would probably pay all debts in 4 years. Much less if growth of its businesses continues as expected.
Google could also pay half in cash and half in stocks facing a dilution of just 15%.
Now that it is clear how affordable Ebay would be.
Antitrust Authorities shouldn’t complain with such merger, because Ebay does no sell advertising. The merger would not reinforce Google’s domination of Ads markets. Google was so unsuccessful in its effort to build an E-commerce platform or a payment system that a GBay wouldn’t change much on those markets either.
Now let’s loom at the strategic advantages for such merger:
A merger Ebay-Google could simply change the World!
Imagine all Adsense money, about $6B a year, flowing trough Paypal accounts: It would create a Googleconomy, skipping the banks. Advertising, selling and buying using the same virtual money, one wouldn’t even need to have a bank account or a credit card… specially if you combine all that with Google’s new phones and with Skype telephony.
Also Google would easily solve EBay’s main problem: lack of technology. EBay’s website would become a modern Web 2.0 marketplace, would be fast like Google, easy to use like Google and well designed like Google.
Both companies have growing revenues (Google 50.60% year on year Ebay 26.80%) and are amazingly profitable ( EBITA around 30% of their growing revenues for both).
GooBAy would be uncontested Word leader in:
1) Online Advertising
2) Online Auctions
3) Online Payments
4) Online Telephony
5) Online Video
6) Online Technology
I agree with Ankesh, when he says that even for Microsoft, Ebay would be a better prey than Yahoo.
I don’t think MicroYahoo could do much to face an Internet giant like GooBay!