The acquisition had little, if anything, to do with any business model that could remotely have made any sense for EBay, but it did have everything to do with a brokerage's need to pay its executives billion dollar bonuses. All it takes is the coercion of a CEO and a Board who will go along with a plan to pillage the corporate coffers and the company's capital structure. Shareholders seldom complain since for all practical purposes, they actually have no voice in the running of public companies whose Boards of Directors are comprised of friends of the CEO.
EBay's IPO in September of 1998 was handled by Goldman Sachs, and it was followed up with a secondary offering in April of 1999. Following a House Financial Services Committee investigation in 2002 it surfaced that Meg Whitman, EBay CEO and a also a director of Goldman Sachs, along with other EBay directors and/or founders Robert Kagle, Jeffrey Skoll and Pierre Omidyar, allegedly purchased shares in 100 Goldman IPOs, and then sold the shares in most of them the next day for a fast profit. Whitman rationalized the practice of flipping, in an interview on CNBC with, "well, everyone else was doing it." This is the strong moral fiber on which her more recent attempts at a political career are apparently based.
Evidently, Ms. Whitman and her cohorts did not violate the letter of the law. Flipping, on what can only be viewed, in my opinion, as insider information, remains legal even after the financial disaster that the economy has enjoyed through the last twelve months at the adept hands of investment bankers including Goldman Sachs and Morgan Stanley. It seems that all of EBay's employees who didn't get in on the sweet stock deals are of a very different class of citizen than those who control the key to the cash and capitalization vault of the company. Perhaps that is also true of the many average EBay shareholders, since they were neither enriched by side deals offered to the Board of their company, nor did they voice much disapproval as the top of their food chain was engorging itself on additional hundreds of millions, simply for being in positions of direct corporate influence.
Back to Skype. Why would Wall Street's golden firm, Goldman Sachs, have stepped down from its heavenly throne and demanded such absurd multi billion dollar overpayment for an acquisition of a service that could be built by a handful of engineers for a few million dollars? Why would Skype, an offshore (Luxembourg) company, have been so appetizing for Goldman? Did the acquisition have anything to do with building the EBay brand or EBay customer service? The best rationalization EBay could come up with was that "Skype would allow customers to discuss transactions in real-time." That kind of non-sense actually floated by all of the MSM at the time of the deal. Did anyone ever divulge the details of the deal's structure? Who actually received the billions that went offshore? Who else was in on the receiving end of all that cash besides the Skype founders Niklas Zennstrom and Janus Friis? Skype was tailor-made for an obscure but rich deal to be pulled off with no prying eyes, and no questions from a fawning media.
The Skype acquisition was never about good business. It was about corporate America being told what to do by its brokers. Now EBay attempts to quietly extricate itself from a very expensive decision that made it look foolish. It now states the obvious, and claims that there are few synergies between the two companies. It should be noted that since Whitman left the company, EBay has made great strides in improving its service and it has vastly upgraded what was a very inelegant and gnarled front end to its web presence.
As EBay unwinds itself from its past to more adroitly confront its future, it would serve its board well to critically revisit some of its past decisions under a new light of business ethics and governance. Such action would serve well the business practices of EBay and numerous other corporations that have too long succumbed to Wall Street's not so subtle coercion.
As for any of the main stream media doing its job when abuse of power and position takes place, ... well, that appears just way too much to expect.?
James Raider writes The Pacific Gate Post
