EBay to Acquire Fixed-Price Web Site in Stock Deal

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Copying fellow online marketers Amazon.com and Yahoo, eBay.com will enter the fixed-price, person-to-person trading market with the planned stock-for-stock acquisition of Half.com.

In an announcement made last week, eBay said the acquisition would expand the buying and selling options for its 12 million-odd members who bid and sell on the site. Half.com has about 250,000 registered users and more than 4 million items for sale.

"The acquisition will result in significant increases in operating expenses for the combined company for the next several quarters but is expected to be accretive in 2001," a statement from eBay said last week.

Though the financial terms of the deal were held back, eBay said 4.6 million to 5.5 million shares will be issued. The deal will close in the third quarter after all approvals are gained. Half.com will retain its own identity and will cross-promote its service with eBay.

Live since January, Half.com allows consumers to buy and sell pre-owned products for at least 50 percent off the list price. Products up for trade include CDs, movies and video games and used books.

Half.com's service is kept intentionally simple. Sellers enter an ISBN code for a book or a UPC code for CDs, movies or videos. They then describe the condition of the item and select a price. Buyers can purchase the item at a fixed price through a credit card.

eBay shares tumbled 7.72 percent to $62.75 the following day after Goldman, Sachs & Co. Internet retail analyst Anthony Noto cut his earnings forecast for the largest online auction marketplace. The downgrade was attributed to the costs associated with the Half.com buy.

Still, the acquisition was good for eBay's long-term growth, Noto said in a note after the deal was made public. Though estimates vary, eBay is said to have 88 percent to 95 percent of all Internet auctions.

"The Half.com acquisition expands eBay's trading platform beyond auctions, enabling eBay to attract a greater number of buyer and sellers, and better aligns products with pricing strategies," he said.

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