UPDATE 1-EBay CEO: Making money on Skype slower than hoped

(Adds executive comments, details on Skype)

SAN FRANCISCO, Jan 24 (Reuters) - EBay Inc. EBAY.O Chief Executive Meg Whitman said on Wednesday the company ended 2006 on a strong note, but cautioned that making money off of its Skype acquisition was taking longer than originally hoped.

The number of registered users of its Skype Web-based phone service tripled over the past year to 171 million at the end of 2006, but the conversion of users of its free services into paying customers was occurring more slowly, she said.

“While Skype continues to experience stellar growth in terms of its user and adoption rates, the monetization efforts we outlined at the time of the acquisition are not developing as quickly as we had hoped,” Whitman told investors on a conference call following the company’s year-end results.

In September 2005, EBay agreed to pay up to $4.1 billion to acquire Skype, assuming certain performance targets are met over the next several years.

The takeover of Skype, a rapidly growing European start-up with little financial track record, had been justified by eBay officials at the time as holding out the promise of rapid growth from customers making overseas calls and by using Skype to connect buyers and sellers on eBay’s core auction business.

Whitman said the company is looking for new ways to make money on Skype by launching new products and services, including subscription-based pricing for international calls.

“We started off the year at a very strong pace, encountered a few hurdles in the middle of the year that we worked to overcome, and then ended the year on a high note,” Whitman said. “In summary, fourth quarter was a very strong quarter.”

((Reporting by Eric Auchard, editing by Braden Reddall; Telephone: +1 415 677 3919; E-mail: Keywords: EBAY RESULTS/OUTLOOK

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