The Position Makers

i’m contemplating the rumors of an ebay-yahoo! deal.

(before i get any further, this is all from ebay strategies and only ebay)

i was originally going to post about the massive growth that ebay itself has had in the classifieds market. even though they have a 25% ownership position in craigslist.org, ebay is continually looking for ways of improving on that product concept (Kijiji, Gumtree and Slando) (this was initally tickled by posts on only ebay), but when i saw there were some serious rumors surfacing that ebay and yahoo! may have a marriage, i thought that was more important to discuss.

right now, i’m trying to figure out if this would be a deal of equals. yahoo!’s offer (again, acording to ebay strat) is for stock at 1.76 shares of yahoo for each ebay share so a marriage of equals doesn’t seem to be in the cards. (supposedly this is a competitive bid against msft).

Pros:

• better competitive web presence, esp. against google.com (potentially justifying yahoo!’s current P/E)
• shrinking of the market place, meaning consolidation (via elimination of competing services each firm offers) would benefit shareholders in that there would be less companies fighting for the same dollar
• someone at yahoo! might actually figure out how to use skype
• full integration of yahoo!’s auxiliary services (such as im and email) with ebay (real time bidding/alerts directly to my IM screen) (thanks lee…even if was a joke)

Cons:

• ebay itself may suffer disproportionately: meaning, yahoo!’s management has been far less than stellar over the last 10 years. that is, it’s gone from “the internet” to marginalized player fighting to keep up w/ google
• ebay is already selling at a major premium (290 P/E!!) which would not serve yahoo! shareholders well (esp. at a buy price equaling 400x earnings!)
• core businesses are lighyears apart, how will a management that’s been struggling to grow, reach economies of efficiency (and in what time frame)?
• skype is left to the way-side, experiencing an unnecessary, premature death.
• further inflation of pumping the stocks solely on ‘future growth potential’

i’m sure we can get more pro’s and con’s. what do y’all think??