Pays $370mn for the purchase; eBay and VeriSign form an alliance for online commerce and security.

eBay and VeriSign, today announced a strategic alliance that calls for the two companies to collaborate on payment services and security initiatives for e-commerce.

Under the terms of the agreements, PayPal, an eBay company, will acquire VeriSign's payment gateway business and combine it with PayPal's merchant services platform. VeriSign will also provide eBay and PayPal with a suite of security services that includes the deployment of two-factor authentication, a security system that gives customers a one-time password or digital certificate to help protect against online identity theft. With the acquisition of VeriSign's payment gateway, PayPal plans to accelerate its merchant services business by expanding its customer base of new small and medium-sized business customers online.

Additionally, eBay and VeriSign have signed a multi-year security technology agreement that calls for eBay to invest in the deployment of VeriSign technologies that enable and protect online transactions, including the purchase of up to one million two-factor authentication tokens. eBay and PayPal plan to begin the rollout of two-factor authentication to customers in 2006. PayPal will pay $370 million to purchase VeriSign's payment gateway business, payable in cash and/or eBay stock.

"At eBay, we're always looking for additional tools and technologies to improve the security of our community's accounts and ensure the privacy of information. Two-factor authentication will be another important way customers can shop safely on eBay and pay with PayPal," said Rob Chesnut, Senior Vice President of Trust and Safety for eBay. "We're thrilled to be working with VeriSign, and are proud to be one of the first e-commerce companies to give our customers access to two-factor authentication."