Better equip PayPal to fight Apple Pay & co
eBay purchased PayPal 12 years ago for 1.5 billion dollars. Both companies profited as PayPal managed a 7.2 billion dollar turnover last year (eBay managed 9.9 billion dollars). The payment division is also growing much faster than eBay: 19 % on a yearly basis compared to 10 % for eBay, even though the latter has a higher profit margin (35 % vs 25 %).
Analysts believe the split is eBay’s answer to fight off the increasing competition in the online payment market (through internet and smartphones). It is a highly competitive market with Google (Google Wallet), Square and Apple (Apple Pay), Amazon and even Alibaba (with Alipay). “The industry landscape is changing, and each business faces different competitive opportunities and challenges”, current eBay CEO John Donahoe said.
Donahoe will leave
It was still a surprise that both companies will go their own way. Carl Icahn, an investor activist and eBay’s sixth largest shareholder, started an offensive 9 months ago to split both companies. He feels PayPal can grow much faster if it is removed from eBay’s hold. It seemed Icahn had given up, but he has now gotten his way.
The goal is to bring PayPal to the stock exchange in the second part of next year and the independent payment company will be led by Dan Schulman, who has worked for American Express.
eBay will also get a new CEO: Devin Wenig, the current CEO for eBay Marketplaces. It is unclear what will happen to the current CEO, John Donahoe, who has fought the possible split of eBay and PayPal for a long time.
