Some say the Frankfurt Motor Show, which started on Sept. 15, has lost a bit of its lustre amid the crisis that has hit the global car industry with an economic baseball bat. But there are still people out there who are willing to shell out the big bucks to go see the new car launches. One lucky bidder, identified only as i***l on www.ebay.de paid 158 euros ($232) for two tickets to get into the car show today, days before other mortals are allowed to pass through the big white doors leading into the halls of the show. There are 150 separate auctions for tickets to the car show, with sale prices starting at 7 euros for tickets valid on the days that are open to the public, which start on Sept. 19. So it looks like there are still plenty of people out there who are just wild about cars even though the government has to pay tightfisted consumers to buy a new one with their cash for clunkers programme. Would you pay that much to get a glimpse of  what the automotive industry has in store before others can?

-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --

Do once-hot Internet start-ups who miss a date with destiny ever truly get a second chance? History says no, even for once-great names like Netscape, AOL and MySpace.

Skype hopes to be the exception. On Tuesday, a group led by top Internet financiers in Silicon Valley and Europe agreed to pay eBay $1.9 billion in cash for a 65 percent stake in the one-time web calling sensation.

The deal values Skype at a face-saving $2.75 billion, well above the $1.7 billion at which it has been valued on the ecommerce giant's books. Ebay also stands to keep a 35 per cent stake in the company.

But that overlooks the humiliating $1.4 billion eBay has written off on the original deal. Four years ago, eBay promised to pay up to $4.3 billion for Skype, but it later scaled back the total payout. All told, it makes Skype one of the biggest value destroyers of any Internet merger since the last days of the dot.com era.

EBay's justification for the Skype deal in 2005 was how its chat and calling services could serve as an online customer service platform connecting consumers directly into eBay merchants. That never happened.

Instead, product innovation slowed and business setbacks, such as a corporate ban on Skype's network-hogging software inside companies, were allowed to fester, rather than becoming new business opportunities.

Pressure to justify the inflated acquisition price by wringing merger synergies out of the deal also proved a distraction. Into the void stepped newer Internet phenomena such as YouTube, Facebook and Twitter, all of which Skype might have displaced.

To be sure, 15 million users sign on every day to Skype for Web-based chats, phone conversations or video phone calls. Skype has registered nearly 500 million users worldwide since its founding in 2002.

Financially, it is still growing at levels that Web companies like Twitter can only dream about. Revenues of $551 million last year look on track to rise to $700 million in 2009, and the company has a goal of hitting $1 billion within two years. It has been profitable for several years, though Skype will not say by how much.

Yet it will take more than this to justify the valuation put on it by its new owners that says Skype is worth more than four times expected 2009 revenue. This looks difficult as long as its primary business remains undercutting established telephone companies on international calls when those rates are rapidly heading towards zero.

The reality is that -- outside of deals with renegade mobile operator 3 -- Skype is considered a pariah by most of the world's telephone operators. They hate how Skype's free, or nearly free, calling services undercut prices for their own calling plans.

Despite these hurdles, Skype must find its way into the center of the growing convergence between phones and computers. To succeed, it must mount a challenge to the new communication market leaders -- Apple and Google, and even companies such as Twitter.

Only then will Skype be able to claim it has defied the odds and become the company to beat once again.

The US telecom regulator FCC has been looking into why Apple rejected an Internet telephony application from Google for inclusion in its iPhone application store. Responses from Google, Apple and AT&T, the exclusive U.S. iPhone carrier, are due today.

Along with Google Voice’s consumer fans, the outcome of the inquiry will be closely watched by other Internet telephone services such as eBay’s Skype. Apple approved a Skype app for iPhone but consumers can only make Skype calls when they are connected to a short-range wi-fi network and not via the AT&T cellular network.
The head of another U.S. Internet telephony provider Vonage weighed in on the topic in an interview this week. Vonage plans to offer its own mobile communications application later this year.

Marc Lefar previously served as chief marketing officer of Cingular, now AT&T Mobility, where he helped put together the mobile operator’s iPhone deal with Apple, before becoming Vonage Chief Executive last year. Taking his previous experience in the wireless industry into acccount, Lefar said it was unclear to him why the Google Voice application was rejected for iPhone.

“These apps we’re talking about, to me … seem to be reasonable to allow, relative to the range of things that have already been put into the app store,” he said.

“I think its very hard to defend a unique service and to distinguish some services in the communications space (from) others if all they do is use software to be able to provide that service,” he said.

“We’re very interested to see what the FCC comes back with. We think the inquiry is completely appropriate,” he said.
So is Lefar worried Vonage’s app will also face a tough time getting approval?
“It’s not a concern,” he said “We understand what the competitive environment is and we think there’s ample opportunity to deliver software applications that deliver some of our services across a range of devices.”
“We go into this with our eyes wide open.” said Lefar but declined comment on specific devices.

(Reuters Photo of Vonage booth at a trade show)

Microsoft says the best way to resolve its dispute with European Union competition regulators may be an election.  The software giant spelled out late on Friday Brussels time plans for an election-style ballot to decide the question of which browser consumers use in Windows.

The forthcoming Windows 7 operating system would offer a "ballot screen" that lets consumers turn off Microsoft's own Internet Explorer (IE) and instead use rival browsers such as Mozilla Firefox, Apple Safari Google Chrome or Opera Software.

 There are two obvious issues with this approach: 1. Most consumers rely on default settings and rarely change their browsers once they are installed. Will more than a small percentage of users elect to change browsers at the moment they are installing Windows?

2. But the big question is whether the majority of consumers who haven't had much choice of using Internet Explorer over the past decade will find that their favourite Web sites work with other browsers. Sure, all the major browser alternatives are designed to support Web standards. But the issue will be the degree to which Web site developers themselves have played along and supported alternatives to IE. Of course the latest modern Web sites will work. But what about the hundreds of thousands of sites built for lazy IE users?

EBAY COURTS BIG RETAIL
eBay is set to announce on Monday plans to make the online auction site a more attractive place for large merchants to dispose of unsold or out-of-season inventory in another move away from its roots as an online flea market or garage sale, AuctionBytes says. EBay isn't commenting directly on the plan. But last week, Mercent, an indepenent developer of marketing systems for retailers, appears to have jumped the gun by saying it was offering a product listing platform for large merchants selling on eBay.

SOLD. AT ALMOST TWICE THE PRICE!!!
Ericsson's last-minute US$1.13 billion bid for the wireless assets of bankrupt Nortel deprived Nokia Siemens and a third rival bidder of the prize. The bad news is that Ericsson ended up spending nearly twice as much as the $650 million Nokia Siemens originally bid for the assets a few weeks earlier.

The auction outcome dims the chances that Nortel will remain one company instead of being split into pieces.

HACKING iTUNES
Late last week, Palm introduced a software work-around that lets its Pre smartphone once again synchronize music and videos with Apple iTunes media management software. Kaufman Brothers analyst Shaw Wu points out that, in effect, Palm was hacking Apple’s closely controlled software for a quick fix.

Earlier this month, Apple introduced a version of iTunes that blocked Palm Pre devices from synching with iTunes, in a potentially crushing blow to Pre's hopes of competing with Apple's iPhone. Wu writes:

We do not believe hacking third-party software to work with one's hardware is a viable long-term business model, especially for a publicly traded company

Some tech mergers take a few years to prove their worth.

Hewlett-Packard’s $19 billion acquisition of Compaq Computer ignited a bitter internal board battle when it was announced in 2001, but is now deemed a key ingredient in H-P’s comeback.

No such vindication is on hand for eBay’s $2.6 billion purchase of Internet telephone service Skype: the deal left many scratching their heads when it was announced in 2005 and now it  looks like officially a poor fit in light of eBay’s plan to spin it off in an initial public offering next year.

“It’s clear that Skype has limited synergies with eBay and PayPal,” eBay CEO John Donahoe said Tuesday in a statement unveiling the plan.

Donahoe became CEO in 2008, replacing Meg Whitman, who orchestrated the Skype deal believing that the ability of eBay’s buyers and sellers to chat on Web phones would mean more transactions.

Donahoe shot that vision down on Tuesday, saying that “separating Skype will allow eBay to focus entirely on our two core growth engines—e-commerce and online payments—and deliver long-term value to our stockholders.”

The move comes a day after eBay unloaded another Whitman acquisition, with the news that online news rating service StumbleUpon would be repurchased from eBay by its founders and a group of private investors.

eBay said it expects to complete the Skype IPO in the first half of 2010. The one-year waiting period might provide some time for the IPO market to awaken from its current state of dormancy, say analysts, or lure a potential buyer for Skype out of the woodwork.

(Refiles to correct Donahoe's first name to John.)

To sell Skype, or not to sell Skype. That is the question for eBay, and Wall Street has diverging opinions on whether the San Jose company will or won't unload its Internet telephone service.
    
Skype was acquired under the reign of former CEO Meg Whitman (now a California gubernatorial hopeful) and touted as a nifty way for eBay's millions of sellers and buyers to connect. That reality never materialized, and current CEO John Donahoe has acknowledged that synergies between eBay and Skype are nonexistent.
    
Still, Skype is on a tear, growing at double digits and adding 350,000 global users a day. The five-year-old company logged $551 million in revenue in 2008 -- that number is expected to double by 2011 -- and is now a subject of great speculation by analysts, who wonder whether eBay plans to spin it off, or hold it close. 
                              
Cowan and Co's Jim Friedland, for one, thinks it's for sale. Writing in a note the day after eBay held an analyst presentation to outline the company's three-year plan, Friedland said it appeared "eBay was using the Skype discussion to trigger a bidding war between Google and Microsoft."
       
"We believe the asset would be attractive to both Google and Microsoft to enhance their web-based enterprise application services. In addition, Skype's user base of 405 million, which is particularly strong internationally, would likely strengthen Google's dominant position in the consumer web app market."

But Bernstein Research's Jeffrey Lindsay did not see it that way: "We think the dearth of buyers such as Google or Microsoft will mean that eBay is more likely to spin out part of Skype to the public (like Time Warner did initially with Time Warner Cable)."
    
Huh. Donahoe, incidentally, has said only that eBay will do what's best "to maximize Skype's potential and value."
    
Deutsche Bank's Jeetil Patel opined that, since Skype is performing well, "Management should hold on to this business model" and Credit Suisse's Spencer Wang said he did not see eBay rushing to sell.
    
"While we think the company would be open to parting with Skype at the right price (currently valued at $1.8 billion on eBay's balance sheet), a divestiture of Skype does not appear imminent," Wang wrote.

(Photo: Reuters)

Wall Street technology investors spent much of Wednesday at eBay's San Jose campus listening to the online giant defend its company, especially its slowing marketplaces unit.

And for anyone doubting the relevance of eBay's site in today's crowded e-commerce field, Mark Carges, the chief technology officer of marketplaces, set them straight.

Walking the crowd through eBay's enhanced search functions, Carges showed a slide encapsulating what may very well be the best of eBay -- "A Hello Kitty wedding cake topper," he announced, to giggles throughout the auditorium.

He paused for emphasis before adding: "Available only on eBay."

The budding techie comedian made the crowd guffaw with a special mention of the item's "satin floral accents."

Other twitters, and not the virtual kind, came when Donahoe told the crowd to turn off their cell phones -- "Unless they're buy orders and then stay on as long as you like."

And finally, regarding that perennial crowd pleaser, valuations, Donahoe asked Chief Financial Officer Bob Swan to explain to the gathered investors how they should value the company.

"Far be it for me to tell them how to value the company" said Swan, demurely.

"Give them hints," suggested Donahoe.

The upshot? EBay -- currently trading at 7 times projected 2009 earnings -- is undervalued, and no laughing matter, according to the company.

Swan said the subject made him "miffed."

NEW YORK - In the same way that the Philadelphia Phillies’ World Series win boosted Inquirer and Daily News sales last week, U.S. President-Elect Barack Obama is jumping in to help papers across the country survive.

People across the country flocked to convenience stores and newsstands snatch up copies of their local papers, which ultimately will prove the most enduring mementos commemorating the election of the first black president of the United States. It’s not a long-term game changer, considering that you can’t hold an historic presidential election every day, but it’s a nice sweetener for a bitter industry story.

Here’s just one example of how the day is shaping up: The New York Times is printing an extra 50,000 copies of today’s paper for the local market after completely selling out, according to spokeswoman Catherine Mathis. (See the Romenesko journalism blog for more details about heavy press runs at other U.S. newspapers.)

Here’s more from Mathis:

We increased our print run for single copy by about 35% but know first hand that some vending machines and newsstands are selling out. … In 2004 we saw an increase in sales of around 50,000 copies the day after the election and based on what we’ve seen today, we expect to significantly surpass those sales.  We also plan to increase our print run for single copy sales tomorrow, although not as much as today.

The Washington Post sent out a press release saying that it increased copies available for sale at retail locations and newsboxes by 30 percent, but sold within hours.

And here’s an UPDATE: When’s the last time you saw an afternoon edition of the New York Daily News? From CEO Marc Kramer: We are happy to report that in addition to extra printed copies of our regular morning edition, which flew off newsstands, we have also printed and are distributing an updated second edition of the Daily News which will be available as early as noon today.

Here’s what else we’re hearing from colleagues, relatives and friends:

New York City: Friends saying it’s impossible to find the Times. Who says print is dead?

New York City: My wife just called after failing to buy the NYT in Park Slope, then Grand Central Station, and news booths in Midtown. Desperate to get one.

Chicago: I train into Chicago’s Union Station and I saw long lines at the newsstand there with a number of people buying five or more Chicago Tribunes or Sun-Times.

Westchester County, New York: The New York Daily News and Post were down to the last two or three copies at the waning moments of rush hour at 9a.m. Same with USA Today. The New York Times was sold out. I got a request from my brother-in-law in Georgia to grab copies of every local paper for him. I tried.

Washington, DC: The Washington Post had sold out at Friendship Heights metro cafe by 8:30 and was also sold out of all the little blue boxes around Foggy Bottom Metro stop.

Los Angeles: [At a 7-Eleven in Burbank,] they had eight Los Angeles Times left.  The clerk said someone came in and bought 13 papers. The Starbucks in Burbank sold out of papers.

Meanwhile, a cursory examination of eBay reveals a copy of today’s Times with a “buy-it-now” price of $19.99.

What are you seeing out there around the country? Are you having trouble finding your paper today?

(Photo: David Cook, an agent in the entertainment industry, looks at empty newspaper racks as he attempts to buy copies of the Los Angeles Times newspaper at the World Book & News newsstand in Hollywod, California, November 5, 2008. Cook has been to six locations attempting to buy newspapers with election day results. This newsstand sold out most of its papers one hour after they arrived in the early morning hours. REUTERS/Fred Prouser )

The Redstone family knows drama. Late last week, Sumner Redstone’s family holding, National Amusements, announced that it was making a substantial stock sale in each of its key holdings, CBS and Viacom to comply with debt covenants. 

But the sale raised questions about whether some of the proceeds from the sales were actually earmarked to fund and expansion of National Amusements movie theater business, as reported by the Wall Street Journal.

Sumner Redstone’s daughter, Shari, who runs National Amusements, issued a statement to the Wall Street Journal denying that the stock sale had anything to do with expanding the theater business.

“The implication that this stock sale was required by the operation and expansion of the company’s theater circuit is not accurate,” Ms. Redstone’s movie theater unit said in an emailed statement Tuesday. “National Amusement’s recent sale of a portion of its Viacom and CBS non-voting stock was the direct result of last week’s historic financial crisis, which included the precipitous drop in value of CBS and Viacom stock.”

Sumner Redstone has not publicly weighed in on the reason for the stock sale, and people familiar with the situation told the Wall Street Journal that he was caught off guard by the events. 

The sale — and the reason behind it — fueled more speculation about tension between Sumner and his daughter. For some time, the two have been at odds over a number of issues, including the direction of the movie theater business and her own professional goals.

Is more family drama ahead? Stay tuned.

Keep an eye on:

• EBay plans a major expansion of its fast-growing U.S. web classifieds unit, but experts doubt it can overtake well-loved rival Craigslist and build a viable business as its online auctions slow (Reuters)
• Financial Times-owner Pearson Plc said its adjusted 2008 earnings per share should be toward the top end of current market estimates if the dollar maintains gains versus sterling (Reuters)
• Colin Callender will leave his job as president of HBO Films by the end of the year to start his own entertainment production company (NY Times)

(Photo: Reuters)

Barry Diller is not backing down. The media mogul’s IAC/InterActiveCorp has once again relaunched its Ask.com search engine — aiming to increase its share of the lucrative Web search market.

Ask.com Chief Executive Officer Jim Safka told Reuters in an interview  that the revamped site — with its faster, better searches — would keep customers coming back for more. He said early tests showed a 16 percent increase in the rate at which customers returned to the search page.

The problem is that Ask.com has a long way to go. Google is the dominant Web search service in the United States, growing in August to more than 63 percent market share, according comScore, a Web audience measurement firm. Yahoo was second with a fall to 19.6 percent share and Microsoft dipped to 8.3 percent. Ask was fourth, growing slightly to 4.8 percent.

And, as the Wall Street Journal points out, this isn’t Ask’s first effort at redesign:

IAC first shifted away from the hallmarks of Ask Jeeves, which was known for answering search queries posed as questions. Then last year Ask tried again with the tech-savvy redesign, Ask3D.

Prior efforts haven’t lifted Ask above a minor competitor in the internet search business.

Still, Safka makes this effort sound promising. Reuters reports that “if a user searches for ‘What’s on TV tonight?’ the results will bring up licensed TV listing results for the user’s local cable operator based on their IP address or if the user types in a local zip code.”

Ask.com efforts come at a crucial time — the search market is in flux with all the major players having talked to one another about various partnerships and deals. If only Ask.com could tell us what the search market will look like a year from now… 

Keep an eye on: 

• The principals behind DreamWorks SKG and Paramount Pictures sealed their parting of ways on Sunday, allowing the DreamWorks studio to tie up with Reliance ADA Group of India to start a new film company (Reuters)
• EBay Inc plans to cut its workforce by 10 percent and expects to exceed its third-quarter earnings forecast (Reuters)
• Netflix Inc., the online DVD rental company, said its fourth quarter revenue and subscriber figures would fall short of expectations (Reuters)

(Reuters photo of Barry Diller)