eBay 2005 Annual Report Download - page 99

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
accordingly, the purchase price for each acquisition has been allocated to the tangible and intangible assets
acquired and liabilities assumed on the basis of their respective estimated fair values on the applicable
acquisition date.
The estimated useful economic lives of the identifiable intangible assets acquired in these acquisitions are
five years for both the trade names and for the customer lists. The final purchase price allocation will depend
primarily upon the completion of our integration plan.
Shopping.com
On August 30, 2005, we acquired Shopping.com Ltd., or Shopping.com, for a purchase price of
approximately $685.3 million. We acquired all outstanding shares of Shopping.com's common stock for
$21 per share in cash totaling approximately $634.5 million and we assumed Shopping.com's outstanding
common stock options, valued at approximately $43.2 million. The total purchase price also includes
approximately $7.6 million in estimated acquisition-related expenses. Shopping.com is a provider of online
comparison shopping and consumer reviews. This acquisition is consistent with our strategy of growing our
global online marketplaces and we believe that it will create a premier online shopping experience for
individuals and businesses of all sizes. We accounted for the acquisition as a taxable purchase transaction and,
accordingly, the purchase price has been allocated to the tangible and intangible assets acquired and liabilities
assumed on the basis of their respective estimated fair values on the acquisition date.
The intrinsic value of Shopping.com's unvested common stock options assumed in the acquisition totaled
approximately $16.8 million and was recorded as unearned stock-based compensation. The unearned stock-
based compensation relating to the unvested options is being amortized on an accelerated basis over the
remaining vesting period of less than one year to four years, consistent with the graded vesting approach under
FASB Interpretation No. 28.
The estimated useful economic lives of the identifiable intangible assets acquired in the Shopping.com
acquisition are four years for the customer base and five years for the trade names and the developed
technology. The final purchase price allocation will depend primarily upon the completion of our integration
plan and the final valuation of certain acquired tax attributes.
Skype
On October 14, 2005, we acquired all of the outstanding securities of Skype Technologies S.A.
(""Skype''), for a total initial consideration of approximately $2.6 billion, plus potential performance-based
payments of up to approximately $1.3 billion. In addition, we agreed to assume Skype's stock options
outstanding as of the closing date and convert them into options to acquire approximately 1.9 million shares of
our common stock. The initial consideration of approximately $2.6 billion is comprised of approximately
$1.3 billion in cash and 32.8 million shares of our common stock. For accounting purposes, the stock portion of
the initial consideration is valued at approximately $1.3 billion based on the average closing price of our
common stock surrounding the acquisition announcement date of September 12, 2005. The shares of our
common stock issued in connection with the acquisition are subject to certain contractual restrictions on
resale. Additionally, the assumed options have been valued at $64.6 million and were included as part of the
purchase price. The purchase price will be allocated to the tangible and intangible assets acquired and
liabilities assumed based on their respective fair values at the acquisition date.
In addition to the initial consideration, the maximum amount potentially payable under the performance-
based earn-out is approximately 41.1 billion, or approximately $1.3 billion, and would be payable in cash or
common stock, at our discretion. The earn-out payments are contingent upon Skype achieving certain net
revenue, gross profit margin-based targets and active user targets. Base earn-out payments of up to an
aggregate of approximately 4877 million, or approximately $1.0 billion, weighted equally among the three
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