Jeff figured I would harp about eBay
I also wasn't critical of the Skype buyout, but since Jeff seems to think that it's a huge deal, I'd better bring some balance into the mix. eBay is already overvalued, trading at 47 times trailing free cash flow and just over 50 times projected earnings this year. Making matters worse, Skype will clearly be a dilutive deal on both fronts in the near-term.
In the long-term, Jeff sees synergies from the mere 1% overlap between Skype and eBay users. I don't know. Call me a dreamer, but I'm guessing that the lack of overlap stems from the two groups being mutually exclusive. The type of person that uses Skype to avoid calling fees is the last person to be ponying up the greenery to list on eBay. That person is Craigslist material (or the European equivalent).
So let's think this potential nightmare through. eBay introduces Skype to eBayers, who in turn get smitten by cyberspace freebies, who in turn defect to Craigslist. Skype isn't something that eBay users requested. This isn't like eBay buying PayPal because it proved more popular than eBay's own flawed Billpoint. Still, here we have eBay paying up to three times more for Skype than it did for PayPal. Ouch!
Skype was a defensive decision, not an offensive one. Google
"The company carries zero inventory [and] has a low capital-intensive, highly scalable business model," Jeff claims.
Guess what? So do Google and Craigslist, and they're growing even faster. They're nimbler, too. Did you know that Craigslist has just 18 employees? Being a highly scalable business cuts both ways. With slower growth, a changing communications landscape, and smarter market-share-munching competitors, don't make the mistake of overpaying for eBay.
Wait! You're not done. This is just a quarter of the Duel! Don't miss Rick's bearish beginning, Jeff Hwang's bullish perspective, and Jeff's final word. When you're done, you're still not done. You can vote and let us know who you think won this Duel.
eBay and Time Warner are Motley Fool Stock Advisor picks.
Longtime Fool contributor Rick Munarriz is a satisfied eBay user -- with the 150 positive feedback recs to show for it. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.