by Manuel Herranz
A phenomenon is something out of the ordinary that occurs and causes interest in people and though we can say that there’s nothing extraordinary if we wonder why did Ebay acquire machine translation company Apptek, (many acquisitions of a similar or greater calibre have taken place). But it certainly has drawn a lot of attention. So we can safely say that it is a mini-phenomenon. To many people it may have come as somewhat of a surprise that a popular and successful online retailer like Ebay would make such a buy… A machine translation company? Why?
What makes the acquisition even more perplexing is that Ebay was developing its own machine translation capabilities until recently. Apptek was a medium-to-small player in the machine translation universe with some older technologies. So it may just be a matter of time before Ebay can fully manage all of its own translations… tons of material it needs to analyze and it wants to distribute far and wide to every corner of the online retail market.
So why the acquisition of Apptek?
The most obvious and realistic answer is that from its Virginia-based headquarters, Ebay is making efforts in expanding its presence on the international scene. It also needs to process and understand what its international shoppers are doing and saying, and perhaps even identify key opportunities in languages that are not English.
In doing so, it follows the path of many other companies that believe the only way to succeed and prosper as companies is by extending their outreach onto the international market and embrace multilinguism as core to their business. The thinking behind the buy strategy according to Ebay makes good business sense. The more people, the more buyers which means more sales that translate into more profits and hence further expansion into the future. What Ebay has found is that 20% of its sales are made up of international sales and are growing faster that its domestic business. With such a tempting apple on the branch, the urge to pluck it and profit from its savoury taste may be the reason behind Ebay’s eagerness to quickly negotiate the acquisition with Apptek.
Additional food for thought
A second type of reasoning behind the decision to acquire Apptek’s specializing arm may also be plausible. Financial experts point out that the metrics of the company are showing signs of a downswing. They reveal its performance as well below the industry average of 21.2%; its debt-to-equity ratio is at a very low 0.21; its earnings per share are declining; the company’s net income has suffered a major blow falling by a staggering 443.6%. Its Return on Equity (ROE) has decreased signalling a major weakness from within the company. There is enough evidence to suggest that Ebay is experiencing a serious downturn in its operations and the need for a rapid response to address it. Finding that its strength lies in its cross-border trading, it is logical that Ebay should seek to strengthen this sector and it has done exactly that by making the acquisition.
Will Apptek be worth the buy?
A second school of thought specifically on business performance points out that despite everything else, a strong EPS growth is a very strong indication of a company’s performance and this is what Ebay is gambling on doing with the acquisition of Apptek. By doing so, it will strengthen its ‘Payments’ operational segment (Market place and Enterprise are its other two segments). Experts see the ‘Payments’ segment which works in consort with improved PassPort as the one to sustain the company in moving ahead into the future. So according to expert opinion, Ebay has made a strategically sound move and stands to reap the rewards in the future.
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