Skype disappoints, eBay mulls $2.6bln cash horde

eBay is doing well, thanks to strong holiday sales of items like the PS3 and Wii consoles. So well in fact, that it has amassed a large cash horde, which it plans to use to buy back some of its stock. Meanwhile their subsidiary Skype is profitable, but not as much as executives would like.

Internet auction company eBay released its earnings report after the bell yesterday, showing strong growth after a quarter that saw the site as one of the few places gaming enthusiasts could get hard to find PS3 and Wii consoles. However it's recently acquired Skype business fell short of expectations. 

eBay, Amazon, and a few other top internet sellers are changing the face of retail. In the most recent holiday season, items like the PS3 were snatched from brick and mortar stores by customers looking to make a quick buck by turning around and selling the games on-line for a huge markup. Others entrepreneurs set up wholesalers to get large shipments from Nintendo and Sony only to place the entire lot on eBay for whatever the market would bear.

And it would bear a lot. One student made the news by trying to get $9,000 for the $600 console (he didn't). While shopping for a Wii before Christmas, a GameStop employee told me that a shipment had just come in but when customers already in the store heard about it, every single one bought a console, causing an immediate sell-out. It's likely that some of those found their way on eBay that very day. I eventually got a Wii on eBay, but only by paying about 40% more than the retail price in order to have it by Christmas day.

eBay gets a cut of every purchase made. During the holiday quarter, customers bought and sold over $14bln worth of goods, netting eBay a tidy $431mil. Due to this success, eBay is currently sitting on a cashe horde of over $2.6bln, according to financial statements. The company plans to use much of that money in a $2bln stock buy-back program.

Despite otherwise rosy news, eBay's acquisition of Skype apparently has yet to pay off in a big way. "While Skype continues to experience stellar growth in terms of its user and adoption rates," Chief Executive Meg Whitman said in an investor conference, "the monetization efforts we outlined at the time of the acquisition are not developing as quickly as we had hoped". But at least the service is profitable, and has the potential to be a larger revenue source in the future. Skype's registered users jumped to 171 million, but net revenues only totaled $66mil in the last quarter.

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