Google Acquisition Rumor Mill Working Overtime

Though tech M&A has been fairly quiet of late because of macro-economic conditions, the rumor mill is churning strong, with Google Inc. (GOOG) in the middle of two rumored deals.

Shares of online travel site Expedia Inc. (EXPE) were up more than 2% Wednesday on top of Tuesday's 10% gain on rumors of a potential buyout by Google. Meanwhile, TechCrunch is reviving a rumor from last year that eBay Inc. (EBAY) is in talks to either sell Skype to Google or the two sides would form a partnership involving the Internet phone service provider.

When we last wrote about a possible Google buy of Skype in November, we didn't think anything was imminent. After all, eBay would have been selling at a low point, having just announced the unit was underperforming. At that time, Skype's quarterly revenues were $98 million. In its last earnings report, Skype's revenues were reported at $115 million, a 76% increase versus the prior year and a 17% increase quarter-over-quarter. So it's not like Skype is a total disaster.

While a sale would not be a bad thing, especially if eBay could recoup the $3.1 billion it spent on the property, a partnership appears to make more sense. With more than 276 million registered users at the end of 2007, Skype holds a lot of potential, but it just may need some help monetizing that user base. Google could potentially do a much better job of it.

An acquisition of Expedia potentially would carry a price tag more than double that of Skype's, though that wouldn't be a problem for cash-rich Google. Trading at $24.85 on Wednesday, Expedia sports a market capitalization of $7.1 billion. Travel would be a natural area for Google to move into as it expands its platform and Expedia would be a good fit. But the rumor seems somewhat tenuous as it emanated from news that Google would be integrating a travel booking feature from Expedia in its Google Maps offering. - David Shabelman

See April 2 post from Silicon Alley Insider
See April 2 post from The Boot
See April 1 post from TechCrunch
See November 2007 post from Tech Confidential