EBay Inc plans to split into three companies
22 January 2015
EBay Inc plans to break up into three different companies, that would involve the separation or divestment of its PayPal payments division, as demanded by activist investor Carl Icahn, and Ebay Enterprise, from its core marketplace division.
The spinoff of PayPal, announced last September (See: PayPal spinoff reports boost eBay stock), is scheduled for the second half of the year, which could see the emergence of two standalone publicly traded companies, which, according to some analysts could be worth more than the combined entity.
PayPal, the 2002 acquisition for which eBay paid $1.5 billion, is the fastest growing segment of eBay's business and could soon account for the major chunk of its revenues.
Yesterday, eBay said it would sell or line up a public offering for its eBay Enterprise unit, which the company bought for $2.4 billion roughly four years ago.
According to chief executive officer John Donahoe, the announced moves were intended to give each business the ability to consider all their alternatives, including a sale.
According to Donahoe, who spoke in an interview yesterday after eBay reported fourth-quarter earnings, none knew what was going to happen down the road. However, each business would have the flexibility they needed to do what they needed to do to win.
The moves come as competition hots up from online rivals such as Amazon.com Inc, Google Inc and Alibaba Group Holding Ltd, and retail giants like Wal-Mart Stores Inc which were investing in their own e-commerce and payments platforms.
Meanwhile, PC World reported eBay's chief financial officer Bob Swan as saying at a conference call to discuss the latest financial results, that EBay was a good business, but was facing challenges that it was working its way through.
EBay's total sales for the last three months of 2014, stood at $4.9 billion, up 9 per cent from the same period in 2013 and in-line with analyst expectations.
Revenue for the company's Marketplaces division, eBay's main consumer-facing business, was up only 1 per cent as against the previous year, to $2.33 billion. The company's net income stood at $936 million, up 10 per cent.
The possible sale of eBay Enterprise, which allowed high street retailers to sell products on the site, was a new option on the table for the company.
Donahoe said during the call that it was clear the two businesses had divergent opportunities versus eBay Marketplaces, declining to comment further.
Without providing a detailed breakdown of the staff cuts, the company said they would be heavier within the eBay Marketplace division and lighter on the PayPal side.