EBay Soars as Talk of Yahoo Deal Intensifies
EBay saw its stock shoot up $20.19 in Nasdaq trading Friday to close at $243.75, a 52-week high, on the strength of various reports saying that Yahoo may acquire the Web’s largest auctioneer. Yahoo shares rose $3 to close at $194, also on Nasdaq.
Executives from San Jose-based EBay and Santa Clara, Calif.-based Yahoo declined to comment.
Whispers about this rumored Internet mega-merger cropped up earlier in the week, only to be discounted by many industry watchers. But according to Safa Rashtchy, an analyst with U.S. Bancorp Piper Jaffray in Minneapolis, Yahoo management has been shopping for a major acquisition.
The rumors’ persistence suggests that some kind of partnership may be in the works for the two Web giants, which are viewed as highly complementary.
“Combining a large online service with the best, largest auction facility is a great [move] for both,” said Barry Parr, an analyst with International Data Corp., based in Framingham, Mass.
EBay and Yahoo share a rare characteristic in a business that has worshiped growth above all else: Each company is profitable.
Even so, each is thought to be eyeing new partnerships in a rapidly consolidating environment populated by behemoths such as America Online, which is acquiring Time Warner.
“The AOL and Time Warner merger has really pushed the urgency for Yahoo” to grow its already formidable audience and to expand into new areas, said Patrick Keane, an analyst with Jupiter Communications in New York.
EBay would not give Yahoo a greater presence in broadband services designed for high-speed Internet connections, such as cable TV lines or phone line-based DSL. Nor would it provide a stream of exclusive media content. Some analysts view those areas as Yahoo’s weaknesses.
Yahoo has instead relied on partnerships to move it forward in broadband and content and has exploited its huge market capitalization--now more than $100 billion--to acquire the best companies available when it expands into a new business sector.
Last year Yahoo purchased GeoCities, the leading Web community site, and Broadcast.com, the largest online audio and video broadcaster. In 1997 it grabbed Four11, a leading free e-mail and Web-directory company.
EBay would clearly fit that pattern. It offers Yahoo an unusually loyal user base that spends lots of time online and has brushed off periodic, embarrassing service outages caused by technical problems. And unlike typical Web-based merchants, as an auctioneer EBay carries no inventory and ships no goods--key stumbling blocks for many e-commerce companies.
A Yahoo-EBay deal could drive Web traffic to each other and raise revenues for both sites through a range of cross-selling methods.
Piper Jaffray’s Rashtchy suggests that, short of a merger, the two companies could be planning a revenue-sharing partnership in which EBay manages Yahoo’s auctions, while Yahoo provides new content or services for EBay users.
