EBay CEO says Skype deal "is going to close"

LAS VEGAS Wed Sep 23, 2009 5:25pm EDT

John Donahoe, president and CEO of eBay attends the Fortune Brainstorm Tech 2009 in Pasadena, California July 23, 2009 file photo. REUTERS/Fred Prouser

John Donahoe, president and CEO of eBay attends the Fortune Brainstorm Tech 2009 in Pasadena, California July 23, 2009 file photo.

Credit: Reuters/Fred Prouser

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LAS VEGAS (Reuters) - EBay Inc Chief Executive John Donahoe said on Wednesday that recent lawsuits will not derail a $1.9 billion deal to sell a majority interest in Web telephone unit Skype to an investor group.

"This deal is going to close," Donahoe told the annual summit of Shop.org, the online arm of the National Retail Federation, in Las Vegas. He added that Skype will be very successful under what he called the "right ownership structure."

Skype has been sued in the United Kingdom and in the United States over rights to its technology. The cases have been brought by Joltid Ltd, a Swedish firm owned by Skype founders Niklas Zennstrom and Janus Friis, who say their software has been illegally used by eBay without authorization.

The investor group named to buy a 65 percent stake in Skype was also sued by Joltid earlier this month. That consortium includes Netscape founder Marc Andreessen's Andreessen Horowitz, venture firm Index Ventures, private equity firm Silver Lake and the Canada Pension Plan Investment Board.

Backstage after the presentation, Donahoe showed Reuters an excerpt of an email message he received that morning from eBay Chief Financial Officer Bob Swan saying no "show stoppers" were identified in the recent spate of litigation.

"We're marching along," Donahoe said, adding that he still expects the deal to close in mid-November.

PAYPAL GROWTH

A growing number of investors believe eBay has turned a corner in its marketplaces unit, its main business that connects buyers and sellers for goods sold in fixed-price, auction and classified formats.

Shares are up 110 percent since early March, and Donahoe told Reuters the company was still focused on carrying out goals identified in March when the company announced a three-year turnaround plan. That plan targets revenue of $10 billion to $12 billion by 2011, largely through growth in its PayPal web payments unit and a turnaround in marketplaces.

Regarding the outlook for holiday shopping, Donahoe said shoppers this season are more "mindful" about their spending, but said he does not expect the deep discounts that were driven a year ago by consumer panic and high inventory levels.

"I'm cautiously optimistic about this holiday season," he said. "I don't see any pronounced big U-shaped things, but we see stabilization."

Search functions on eBay have improved 50 percent in the past year and could improve yet another 50 percent, he said.

And PayPal will drive "Darwinian innovation" by opening up its platform to third-party developers, especially within mobile, Donahoe said, citing TwitPay -- which allows Twitter users to send money using PayPal-- or PayPal's iPhone application or an application on Facebook that allows users to donate money to charity via PayPal.

EBay Mobile has done some $380 million in volume thus far this year, fueled by Apple Inc's iPhone, he said.

WAL-MART SLIGHT

The head of the San Jose, California-based company cast eBay as a technology company that, after a period of stagnancy, has now adapted to, and is now laser-focused on, the evolution of online commerce.

Donahoe said eBay will never compete with its sellers, a passing reference to rival Amazon.com Inc, the largest online retailer that competes with eBay in the third-party arena, in which sellers post their own goods for sale on Amazon's website.

"We aren't going to buy a shoe retailer for instance. We aren't going to develop private-label products," he said.

Amazon recently acquired online shoe store Zappos.com in a deal valued at $928 million and has begun to increase the scope of its private-label products sold on its site.

Donahoe then took a swipe at the world's largest retailer, Wal-Mart Stores Inc, which recently said that external sellers can now sell their goods on www.walmart.com.

"When I read about Wal-Mart's third-party marketplace it struck me, the great news is that Wal-Mart has a great history of cooperating with other businesses!" said Donahoe, to audience laughter and applause. "It's deeply in their genetics."

(Reporting by Alexandria Sage; Editing by Phil Berlowitz)

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