eBay Offers $1.2 Billion For Korea's Gmarket

EBay on Thursday said it will offer $1.2 billion to purchase Gmarket, a Korean e-commerce firm that specializes in online auctions.

The Gmarket deal is at the heart of eBay's online business and along with eBay's Internet Auction Co. (IAC) strengthens eBay's business in Korea.

"The combination of Gmarket and IAC establishes an exceptionally strong leadership position for eBay," eBay CEO John Donahoe said of the Korean units. "This deal creates strong operational synergies between the two market leaders (Gmarket and IAC), offers more opportunities for sellers, and enhances our ability to serve complementary consumer segments."

EBay also indicated the Gmarket-IAC combine represents a platform for expansion. Young Bae Ku, Gmarket's president and CEO, said in a statement that the "transaction will provide us an excellent opportunity for our next growth stage in Korea and will also help accelerate our expansion strategies beyond Korea."

The acquisition news comes as eBay disposed of search unit StumbleUpon and made plans to dispose of nonstrategic VoIP calling unit Skype.

The decision to dispose of Skype came as no surprise, because the VoIP calling operation, although a successful business, provided precious little synergies with eBay's core e-commerce business. Since Donahoe took over the helm at eBay, he focused Skype on becoming a successful standalone company. "Skype is a great standalone business with strong fundamentals and accelerating momentum," Donahoe said in announcing that the VoIP operation would be spun out in an IPO next year.

For eBay, an IPO would also avoid the embarrassment of selling Skype back to its original founders for less than eBay paid for it when its then-CEO Meg Whitman hailed the VoIP firm for its synergistic features. Whitman is expected to seek the Republican nomination for governor of California as a fiscal conservative, and an IPO would avoid an embarrassment for her, too.

Skype founders Niklas Zennstrom and Janus Friis were widely reported to be planning to bid for Skype, but the planned IPO preempts any acquisition effort by them. EBay has committed more than $3 billion in the Skype acquisition. Donahoe this week noted that Skype had margins of 21% in 2008 on revenue of $551 million. The calling unit had 405 million registered users at the end of the year, and eBay said it expects Skype to log more than $1 billion in revenue in 2011.

As for StumbleUpon, the company was returned to its original team after eBay determined it wasn't a strategic fit. StumbleUpon said its registered user base has grown from 2.5 million in May 2007 when eBay acquired it to 7.5 million now.

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