Acquisition of Skype
Legal disclosures placeholder

This presentation contains non-GAAP measures relating to the company's performance. You can...
The acquisition of Skype




                           3
eBay is evolution


•   1996 – 1998: US only, collectibles only

•   1999 – Moving beyond collectibles

•   1999 – Going g...
High performance company

(Real 2003 $M)

 1,000,000

   100,000

    10,000

      1,000

       100

        10

       ...
High performance company

(Real 2003 $M)

  1,000,000

   100,000
                            GMV

    10,000        TPV

...
Expanding eBay’s share of e-commerce


 • Skype will accelerate commerce on eBay

 • Skype opens up new lines of business,...
Agenda


What is Skype?

Expanding eBay’s share of e-commerce

A great standalone business
Financials




                ...
Simply powerful




                         Any Skype user in the
                             World (Free)
             ...
Simply powerful




                           Any Skype user in the
                               World (Free)
         ...
Easy to set up and use


            1

  Download and install
Skype client from website,
      get headset




          ...
Easy to set up and use


            1                    2

  Download and install       Look up and
Skype client from we...
Easy to set up and use


            1                    2                  3

  Download and install       Look up and  ...
Rich functionality

                              Skype Me…
     Find other Skype users



                               ...
Viral growth
                                                       44.1


               On track for
                   ...
Viral usage

                                                      3.9

                 67%                            3....
Historic success
Number of
Reg Users
(MM) 60



     50


     40


     30


     20


     10


      0
          1   3 ...
Historic success
Number of
Users (MM)
     60


     50
                                                       Adding 150K...
A truly global community




     SKYPE users
     Non SKYPE users




       Skype has a presence         Skype is a mark...
Significant buzz all over the world…




       “To ‘Skype’ is to call someone
        over your computer”
               ...
Agenda


What is Skype?

Expanding eBay’s share of e-commerce

A great standalone business
Financials




                ...
Accelerating e-commerce


                          • Accelerate existing
                            categories

• Create...
A new way to monetize e-commerce


      eBay Today             eBay with Skype



                               Transact...
Communication is key to e-commerce

      The online transaction process requires various
           communication points ...
Communication is key to e-commerce

      The online transaction process requires various
           communication points ...
Skype is a leap forward in communication



  • In transaction flow

  • Instantaneous and private

  • Free with rich exp...
eBay has historically removed friction

      Friction point                Solution



        Trust &
        safety    ...
Removing friction is powerful
                                                                                 $1.4B
     ...
Accelerating e-commerce


                          • Accelerate existing
                            categories

• Create...
Skype accelerates certain existing
categories


                          Motors       Business and industrial

Communicat...
Skype accelerates certain existing
categories: Example
                Future motors listing




             Firstclassau...
Communications enables
expansion into new categories


 Skype allows superior
 access to categories that
  • Require signi...
Communications enables
expansion into new categories


 Skype allows superior
 access to categories that
  • Require signi...
Pay Per Call enables monetization of
    new marketplaces

             Pay Per Call on Local Classifieds

               ...
Expanding the global footprint

      Emerging markets               New markets       Cross-border trade




      India ...
Skype on eBay China




                      36
Agenda


What is Skype?

Expanding eBay’s share of e-commerce

A great standalone business
Financials




                ...
A great standalone business



 1   A large and growing opportunity

 2   A strong leadership position

 3   Competitive a...
An important consumer activity

Minutes
                                                                                 4...
Increasing penetration

Global Broadband subscribers (M)
                                                       '04-'09
35...
Increasing penetration

Global Broadband subscribers (M)                                 US Broadband and VOIP households ...
Increasing usage

               VOIP Annual Minutes of Use (B)                 1,495




                                ...
A leadership position

 Skype’s global revenue base




                 Other
                 12%
                     N...
A leadership position

 Skype’s global revenue base                 Skype segment share in North America




             ...
Strong team



 • Founders created Kazaa,
   were executives at Tele2

 • Entrepreneurial senior       Niklas Zennström
  ...
Focus matters


                Commerce


                Payments




                           46
Focus matters


                Commerce


                Payments




                Search


                Content

...
Focus matters


                Commerce


                Payments


                Communications


                Sea...
Advanced technology


Virtual, peer-to-peer architecture
brings key advantages
    • System is massively scalable
    • No...
Many great applications

    Internet Explorer Toolbar - Beta          Integration with Outlook - Beta




      Web Prese...
Many great applications

    Internet Explorer Toolbar - Beta          Integration with Outlook - Beta




      Web Prese...
Many great applications




                          52
Many great applications

    Internet Explorer Toolbar - Beta          Integration with Outlook - Beta




      Web Prese...
Many great applications




                          54
Many great applications

    Internet Explorer Toolbar - Beta          Integration with Outlook - Beta




      Web Prese...
Many great applications

    Internet Explorer Toolbar   Integration with Outlook




    Picture share with Kodak    Web ...
Many great applications

    Internet Explorer Toolbar - Beta          Integration with Outlook - Beta




      Web Prese...
Many great applications

                                Valuable content and services
   Voice Marketplace




• Create a...
Reinforcing ecosystem



                        1000+ Developers




200+ Hardware devices                       200+ Sky...
The power of three

   Users invite
   other users




    New users
   invite more
      users




                     60
The power of three

   Users invite   Sellers go where   More sellers
   other users       buyers are      offer PayPal


...
The power of three

   Users invite    Sellers go where        More sellers
   other users        buyers are           off...
Agenda


What is Skype?

Expanding eBay’s share of e-commerce

A great standalone business
Financials




                ...
Valuation considerations

• Traditional financial valuation methods
   – Precedent transactions
   – Value per user
   – D...
The power of three: synergistic
opportunities


 eBay + Paypal Users
  • 157M eBay registered
    users
  • 79M PayPal acc...
The power of three: synergistic
opportunities


 eBay + Paypal Users         Skype Users
  • 157M eBay registered      • 5...
The power of three: synergistic
opportunities


 eBay + Paypal Users         Skype Users            Skype Users
  • 157M e...
Transaction summary

                     •   Pay $1.3B(1) in cash
 Transaction Value   •   Deliver $1.3B(1) in eBay stock...
Strong Business Model




 • Large market opportunity
 • Transaction-based revenues       Rapid revenue growth
 • No inven...
Skype revenues


 Free services      Premium services




                    SkypeIn and SkypeOut



 Free Skype to
  Sky...
Strong Revenue Growth


                                                                                      $259.0

    ...
Strong Revenue Growth


                                                                                      $259.0

    ...
Skype revenues

                    Premium services                New eBay
 Free services                               ...
Leveraged cost structure

•   Efficient customer acquisition
     – Word of mouth significantly reduces user acquisition c...
Financial impact


 • Dilutive to Q4-05 pro-forma and GAAP EPS by
   $0.01 and $0.04, respectively

 • Dilutive to 2006 pr...
eBay Inc Balance Sheet


•   Funding acquisition through internally generated cash flows


•   Balance sheet fundamentals ...
Summary


• A great standalone business with a very
  complementary business model

• Significant growth opportunities:
  ...
The power of 3

                        Sellers go where
                           buyers are




                       ...
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The Power of Three

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The Power of Three

  1. 1. Acquisition of Skype
  2. 2. Legal disclosures placeholder This presentation contains non-GAAP measures relating to the company's performance. You can find the reconciliation of those measures to GAAP measures in the tables of our earnings release which is available through our investor relations website located at http://investor.ebay.com/downloads/Reconciliation.pdf. In addition, this presentation may contain forward-looking statements regarding matters that involve risk and uncertainty, including those relating to the future financial results of Skype and eBay, and the impact of the acquisition of Skype on eBay’s financial results. Our actual financial results could differ materially from those represented in this presentation. Factors that could cause or contribute to such differences include, but are not limited to, the receipt and timing of the closing of the transaction, the possibility that the transaction may not close, the reaction of the users of Skype’s services, the future growth of Skype’s user base, the reaction of competitors and regulatory agencies to the transaction, developments in the regulation of voice-over-Internet protocol (VoIP) services including those provided by Skype, and the possibility that integration following the transaction may be more difficult than expected. More information about factors that could affect the company’s operating results is included under the captions “Risk Factors That May Affect Results of Operations and Financial Condition” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, copies of which may be obtained by visiting the company’s investor relations site at http://investor.ebay.com. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the company on the date hereof eBay assumes no obligation to update such statements. 2
  3. 3. The acquisition of Skype 3
  4. 4. eBay is evolution • 1996 – 1998: US only, collectibles only • 1999 – Moving beyond collectibles • 1999 – Going global • 2000 – Introducing Fixed Price and eBay Stores • 2002 – PayPal: removing friction and building a huge new business • 2004 – 2005: Creating other marketplaces Marktplaats, Mobile, Rent.com, Shopping.com, Kijiji, ProStores • Common theme – expanding our vision, our market and our opportunity • Aspirational goal of growing faster than e-commerce 4
  5. 5. High performance company (Real 2003 $M) 1,000,000 100,000 10,000 1,000 100 10 1 1 5 9 13 17 21 25 29 33 37 41 Years Since Incorporation 5
  6. 6. High performance company (Real 2003 $M) 1,000,000 100,000 GMV 10,000 TPV 1,000 100 10 1 1 5 9 13 17 21 25 29 33 37 41 Years Since Incorporation 6
  7. 7. Expanding eBay’s share of e-commerce • Skype will accelerate commerce on eBay • Skype opens up new lines of business, new monetization models, new geographies • A great standalone communications business • eBay + PayPal + Skype = Unparalleled e-commerce and communications engine 7
  8. 8. Agenda What is Skype? Expanding eBay’s share of e-commerce A great standalone business Financials 8
  9. 9. Simply powerful Any Skype user in the World (Free) Internet 9
  10. 10. Simply powerful Any Skype user in the World (Free) Internet Any Regular Telephone in the World (Low cost) 10
  11. 11. Easy to set up and use 1 Download and install Skype client from website, get headset 11
  12. 12. Easy to set up and use 1 2 Download and install Look up and Skype client from website, add buddies get headset 12
  13. 13. Easy to set up and use 1 2 3 Download and install Look up and Start talking with Skype client from website, add buddies other Skype users get headset 13
  14. 14. Rich functionality Skype Me… Find other Skype users Send any kind of file Advanced Instant Messaging Make conference calls Are you available? Call any phone Wallet Get calls from any Leave voicemail phone on your Skype number Forward calls to any number 14
  15. 15. Viral growth 44.1 On track for 57M 32.9 registered Users in Q3! 19.8 11.5 6.8 4.1 Q104 Q204 Q304 Q404 Q105 Q205 Skype Registered Users (M) 15
  16. 16. Viral usage 3.9 67% 3.3 CQGR! 2 0.9 0.5 0.3 Q104 Q204 Q304 Q404 Q105 Q205 Skype Quarterly Minutes Served (B) 16
  17. 17. Historic success Number of Reg Users (MM) 60 50 40 30 20 10 0 1 3 5 7 9 11 13 15 17 19 21 23 25 Months(1) (1) eBay starts Q2 98, PayPal starts Q1 00, Yahoo! starts Q1 95, AOL since Q1 92 17 (IPO) from company data and Merrill Lynch estimates, Skype since launch in 2003
  18. 18. Historic success Number of Users (MM) 60 50 Adding 150K registered users / day 40 30 20 10 0 1 3 5 7 9 11 13 15 17 19 21 23 25 Months(1) (1) eBay starts Q2 98, PayPal starts Q1 00, Yahoo! starts Q1 95, AOL since Q1 92 18 (IPO) from company data and Merrill Lynch estimates, Skype since launch in 2003
  19. 19. A truly global community SKYPE users Non SKYPE users Skype has a presence Skype is a market leader in 225 countries and independent in every territories worldwide major country(1) (1) Skype estimates 19
  20. 20. Significant buzz all over the world… “To ‘Skype’ is to call someone over your computer” USAToday (17 December 2004) 20
  21. 21. Agenda What is Skype? Expanding eBay’s share of e-commerce A great standalone business Financials 21
  22. 22. Accelerating e-commerce • Accelerate existing categories • Create a new way to • Expand into new monetize e-commerce categories • Remove a key friction • Monetize new marketplaces • Expand the global footprint 22
  23. 23. A new way to monetize e-commerce eBay Today eBay with Skype Transaction Transaction- and based lead-generation monetization monetization Listing fees Listing fees Final value fees Final value fees Pay Feature fees Feature fees + per call PayPal fees PayPal fees 23
  24. 24. Communication is key to e-commerce The online transaction process requires various communication points along the way “Steve” “Bob” the the seller buyer Q+A before purchase Closing transaction Order status 24
  25. 25. Communication is key to e-commerce The online transaction process requires various communication points along the way “Steve” “Bob” the the seller 5M e-mail messages are buyer initiated per day between eBay buyers & sellers 30% of eBay bids take place in the last 2 hours! 25
  26. 26. Skype is a leap forward in communication • In transaction flow • Instantaneous and private • Free with rich experience • Advanced functionality 26
  27. 27. eBay has historically removed friction Friction point Solution Trust & safety Feedback Description Pictures Payments Shipping 27
  28. 28. Removing friction is powerful $1.4B $1.4B eBay UK GMV (USD) Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Q1 Q1 2001 2002 2003 2004 2005 28
  29. 29. Accelerating e-commerce • Accelerate existing categories • Create a new way to • Expand into new monetize e-commerce categories • Remove a key friction • Monetize new marketplaces • Expand the global footprint 29
  30. 30. Skype accelerates certain existing categories Motors Business and industrial Communications can accelerate categories that are: Collectibles Sporting goods • High involvement • Expensive • Complex Music instruments Jewelry and watches Motors, collectibles, and B&I alone represent ~40% of eBay GMV 30
  31. 31. Skype accelerates certain existing categories: Example Future motors listing Firstclassauto – currently online! “ Firstclassauto – currently online! ” 31
  32. 32. Communications enables expansion into new categories Skype allows superior access to categories that • Require significant communication • Are less suited to transaction-based monetization Source: Jupiter, Borrell, NADA, 32 Manheim, eBay estimates
  33. 33. Communications enables expansion into new categories Skype allows superior access to categories that • Require significant communication • Are less suited to transaction-based monetization Source: Jupiter, Borrell, NADA, 33 Manheim, eBay estimates
  34. 34. Pay Per Call enables monetization of new marketplaces Pay Per Call on Local Classifieds Paris Listing Sponsorisé Charles de Gaulle Renault Les meilleurs voitures! Skype moi! Bagnolet Peugeot Skype moi! BelleVille Audi Skype moi! 34
  35. 35. Expanding the global footprint Emerging markets New markets Cross-border trade India China Japan Nordic Poland Brazil Russia • Large grey markets • Limited eBay • Limited trust • Limited trust on Internet presence • Buyers need • Culture of haggling • Large growth in more interaction • Culture of IM/mobile Skype users and information • Price sensitivity from sellers 35
  36. 36. Skype on eBay China 36
  37. 37. Agenda What is Skype? Expanding eBay’s share of e-commerce A great standalone business Financials 37
  38. 38. A great standalone business 1 A large and growing opportunity 2 A strong leadership position 3 Competitive advantage 38
  39. 39. An important consumer activity Minutes 480 per user 500 per 450 44% of all user month(1) time online is 400 spent 350 communicating(2) 435 Calls from 300 home(3) 250 195 Share of VOIP 200 calls expected 150 127 to increase 80 significantly 100 over time 50 16 45 Skype today 0 Search eBay Web Email IM Phone marketplace Communications Source: (1) Nielsen Netratings averages for biggest sites in each category, (2) eBay estimates from Comscore data, (3) 39 Yankee Group as of April 2003
  40. 40. Increasing penetration Global Broadband subscribers (M) '04-'09 350 CAGR 317.3 21.6% 300 287.8 256.9 250 13.8% 223.1 200 185.4 145.7 150 18.1% 100 50 18.8% 0 2004 2005 2006 2007 2008 2009 United States Europe Asia/Pacific ROW Source: IDC 40
  41. 41. Increasing penetration Global Broadband subscribers (M) US Broadband and VOIP households (M) '04-'09 350 CAGR 80 30M VOIP 317.3 households in 72.3 Total BB 300 287.8 21.6% 70 US by 2009 66.9 256.9 58.5 60 250 13.8% 223.1 50.1 50 200 185.4 41.1 40 145.7 32.6 150 18.1% 30 24.6 38% % VoIP 100 20 29% 50 18.8% 10 20% 8% 13% 1% 3% 0 0 2004 2005 2006 2007 2008 2009 2003 2004 2005 2006 2007 2008 2009 United States Europe Asia/Pacific ROW VoIP subscribers Broadband households Source: IDC 41
  42. 42. Increasing usage VOIP Annual Minutes of Use (B) 1,495 760 367 183 42 72 10 17 27 2001 2002 2003 2004 2005E 2006E 2007E 2008E 2009E Source: IDC 42
  43. 43. A leadership position Skype’s global revenue base Other 12% NA EU 13% 48% Asia 27% % of total Source: Skype, Sandvine 43
  44. 44. A leadership position Skype’s global revenue base Skype segment share in North America Other VOIP 12% 46.2% Skype is #1 Minutes NA EU 13% 48% Asia VOIP 27% 35.8% Skype is #1 Users % of total 0 20 40 60 Estimated ~25% of Percent of total (%) Skype users are businesses Source: Skype, Sandvine 44
  45. 45. Strong team • Founders created Kazaa, were executives at Tele2 • Entrepreneurial senior Niklas Zennström management team from CEO & Co-Founder Tele2, Microsoft, Yahoo!, OpenWave • Developers pioneered peer- to-peer technology Janus Friis Co-Founder 45
  46. 46. Focus matters Commerce Payments 46
  47. 47. Focus matters Commerce Payments Search Content 47
  48. 48. Focus matters Commerce Payments Communications Search Content 48
  49. 49. Advanced technology Virtual, peer-to-peer architecture brings key advantages • System is massively scalable • No single point of failure • Low CapEx In addition, Skype has • Better firewall tunneling that allows more calls to be completed • Advanced security and encryption technology 49
  50. 50. Many great applications Internet Explorer Toolbar - Beta Integration with Outlook - Beta Web Presence Integration Voice Marketplace Interactive Language Homework voice learning tools tutoring response 50
  51. 51. Many great applications Internet Explorer Toolbar - Beta Integration with Outlook - Beta Web Presence Integration Voice Marketplace Interactive Language Homework voice learning tools tutoring response 51
  52. 52. Many great applications 52
  53. 53. Many great applications Internet Explorer Toolbar - Beta Integration with Outlook - Beta Web Presence Integration Voice Marketplace Interactive Language Homework voice learning tools tutoring response 53
  54. 54. Many great applications 54
  55. 55. Many great applications Internet Explorer Toolbar - Beta Integration with Outlook - Beta Web Presence Integration Voice Marketplace Interactive Language Homework voice learning tools tutoring response 55
  56. 56. Many great applications Internet Explorer Toolbar Integration with Outlook Picture share with Kodak Web Presence Integration 56
  57. 57. Many great applications Internet Explorer Toolbar - Beta Integration with Outlook - Beta Web Presence Integration Voice Marketplace Interactive Language Homework voice learning tools tutoring response 57
  58. 58. Many great applications Valuable content and services Voice Marketplace • Create and share Interactive Language Homework innovative voice voice learning tutoring services response tools (eg. traffic • Content providers get a reports) share of call revenue Key partners 58
  59. 59. Reinforcing ecosystem 1000+ Developers 200+ Hardware devices 200+ Skype-enabled labeled as Applications Skype-compatible 30+ partnerships with world-class companies 59
  60. 60. The power of three Users invite other users New users invite more users 60
  61. 61. The power of three Users invite Sellers go where More sellers other users buyers are offer PayPal New users Buyers go where More buyers invite more sellers are use PayPal users 61
  62. 62. The power of three Users invite Sellers go where More sellers other users buyers are offer PayPal New users Buyers go where More buyers invite more sellers are use PayPal users eBay Users PayPal Wallet eBay Users eBay Usage Skype Users Skype Users PayPal Wallet Skype-Enabled eBay & Skype Usage Commerce 62
  63. 63. Agenda What is Skype? Expanding eBay’s share of e-commerce A great standalone business Financials 63
  64. 64. Valuation considerations • Traditional financial valuation methods – Precedent transactions – Value per user – Discounted cash flow • Earn out structure based on aggressive goals • A great standalone business, not just VOIP functionality – Leading market position with considerable momentum – Technology leadership – Considerable monetization potential • Synergistic opportunities with existing businesses 64
  65. 65. The power of three: synergistic opportunities eBay + Paypal Users • 157M eBay registered users • 79M PayPal accounts • 1% overlap between Skype and eBay US users today(1) eBay Usage • 5M email messages/day • 1.4B new listings/year PayPal Wallet • Boosts sales of premium services (1) Nielsen Netratings 65
  66. 66. The power of three: synergistic opportunities eBay + Paypal Users Skype Users • 157M eBay registered • 54M registered users users • 79M PayPal accounts • ~25% of users are • 1% overlap between business accounts Skype and eBay US users today(1) Skype Commerce (usage) eBay Usage • Skype-enabled • 5M email messages/day commerce • 1.4B new listings/year • 200+ Skype hardware applications PayPal Wallet • Boosts sales of premium services (1) Nielsen Netratings 66
  67. 67. The power of three: synergistic opportunities eBay + Paypal Users Skype Users Skype Users • 157M eBay registered • 54M registered • >80% outside US users users • 79M PayPal accounts • ~25% of users are • 1% overlap between business accounts Skype Usage Skype and eBay US • Payment of call users today(1) services Skype Commerce • Send money to (usage) buddies eBay Usage • Skype-enabled • 5M email messages/day commerce • 1.4B new listings/year • 200+ Skype hardware applications PayPal Wallet • Boosts sales of premium services (1) Nielsen Netratings 67
  68. 68. Transaction summary • Pay $1.3B(1) in cash Transaction Value • Deliver $1.3B(1) in eBay stock subject to certain sale and Structure restrictions • Total of $2.6B (4.8% of market cap) • Earn out of up to an additional $1.5B(1,2) based on high active user, gross profit, and revenue goals in Performance-based 2008 earn out – Earn out participants received less up-front consideration – All of management opted for the earn out Expected Closing • Q4 2005 (1) Based on an exchange rate of € 1.239 68 (2) Earn-out value presented on an undiscounted basis
  69. 69. Strong Business Model • Large market opportunity • Transaction-based revenues Rapid revenue growth • No inventory or warehouses • Efficient customer acquisition • High operating leverage Outstanding cash generation • Low capital requirements (1) Nielsen Netratings 69
  70. 70. Skype revenues Free services Premium services SkypeIn and SkypeOut Free Skype to Skype calls Expressive content (avatars, ringtones, (cost nothing to ringbacks) provide) Hardware royalties 70 Voice services
  71. 71. Strong Revenue Growth $259.0 Existing Lines Of Business $200+ $103.8 $60 $47.4 $7 $12.6 (Dollars in millions) $0.4 $5.7 2004 2005E 2006E 1996 1997 1998 2000 2001 2002 71
  72. 72. Strong Revenue Growth $259.0 Existing Lines Of Business $200+ $103.8 $60 $47.4 $7 $12.6 (Dollars in millions) $0.4 $5.7 2004 2005E 2006E 1996 1997 1998 2000 2001 2002 72
  73. 73. Skype revenues Premium services New eBay Free services Opportunities • Existing eBay Categories SkypeIn and SkypeOut Free Skype to Skype calls Expressive content • Emerging markets (cost nothing to (avatars, ringtones, ringbacks) • New geographies provide) • Cross-border trade Hardware royalties • New categories • New marketplaces (classifieds, 73 Voice services shopping.com)
  74. 74. Leveraged cost structure • Efficient customer acquisition – Word of mouth significantly reduces user acquisition cost • High operating leverage – Minimal incremental cost for each user call – Software business model with low fixed costs • Infinitely scalable network infrastructure with low capex – Peer to Peer technology requires minimal capex – Distributed architecture eliminates single point of failure – Centralized server(s) for authentication for basic services – Centralized server(s) for premium services, e.g. voicemail Outstanding cash generation capability 74
  75. 75. Financial impact • Dilutive to Q4-05 pro-forma and GAAP EPS by $0.01 and $0.04, respectively • Dilutive to 2006 pro-forma and GAAP EPS(3) by $0.04 and $0.12, respectively • Breakeven on a pro-forma basis in Q4 2006 • Long term operating margins of 20-25% (3) Not adjusted for FAS 123 75
  76. 76. eBay Inc Balance Sheet • Funding acquisition through internally generated cash flows • Balance sheet fundamentals remain unchanged: – Cash reserves of >$1B – Annualized free cash flows of >$1.5B – Low capex requirements: ~$2M in 2006 – No long-term debt • Long-term revenue and profit growth will continue to add to already strong cash flow position 76
  77. 77. Summary • A great standalone business with a very complementary business model • Significant growth opportunities: – Build on Skype momentum – Accelerate eBay existing and new businesses – Create entirely new businesses • The power of 3 77
  78. 78. The power of 3 Sellers go where buyers are Buyers go where sellers are Users invite More Sellers other users Offer PayPal New users invite More Buyers more users use PayPal 78
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