Stock Preacher

Yesterday eBay agreed to sell a 65% stake in its Skype Internet calling service, bringing closure to a deal that was viewed as the Internet auction company’s biggest strategic mistake. The sale to a group of private investors, in return for US1.9B in cash and a US$125M debt instrument, marks the reversal of an ambitious 2005 push into online communications that came to cloud the final years at the company of Meg Whitman, its former chief executive. The transaction will cut loose one of the biggest and fastest-growing private Internet businesses. With US$551M of revenues last year and 405MM registered users, Skype’s global reach has made it one of the best-known consumer brands, and its free computer-to-computer calls have had a disruptive effect on traditional telephone companies. Read more

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Vonage Holdings Corp shares surged 35% on Wednesday on growing views that the company would survive despite earlier skepticism over its business model. The stock has now climbed more than 300% in the past week, a rally that has surprised analysts who say the company still faces stiff competition and weak revenue. Last week, the stock was trading at less than 50 cents a share, and yesterday it closed above US$2.00/shr. on news of Google Inc’s new voice application may be renewing interest in VoIP, a technology that Vonage pioneered. Vonage was among the first to offer Internet-based calling services to people looking for cheaper alternatives to regular phone lines. Since its inception, the company has struggled with high costs and competition from traditional phone and cable operators that now offer bundled video, Internet and phone services. It is also challenged by SKYPE, a unit of eBay Inc, and other Internet-based services. While it posted its 1st quarterly net profit earlier this month, a weaker economy resulted in fewer subscribers. Vonage, perhaps, is in the sights of a larger company.

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