Digital Bounds Logo

eBay and PayPal Announce Split

In a recent statement released by eBay, speculation of separation between eBay and Paypal were proved to be well-received as they were approved by investors. The statement relies on a “thorough” data-driven and shareholder-conscious review of the company that provides the general narration that shareholders and CEOs agree that a separation of the two commerce giants are necessary in order for both companies to achieve maximum financial success.

As the statement released by eBay reads:

“…A thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively. The industry landscape is changing, and each business faces different competitive opportunities and challenges…

Current eBay CEO John Donahue defended the decision as well as hinted at the future of eBay and PayPal’s plans to remain independent-but not completely isolated:

When you look forward, eBay will be less than 15 percent of PayPal’s business three years from now… We can achieve many of the benefits of the synergies through arms-length commercial relationships.”

 Set to be completed in the second half of next year, the plan comes six months after billionaire activist and hedge-fund owner Carl C. Icahn first suggested the deal citing major concerns with the management of eBay. As reported by The New York Times Icahn, at the time of his suggestion, went so far as to say that eBay was among the worst-run companies he had ever seen and described Mr. Donahoe as “either incompetent or negligent.”

But upon hearing of the recent news, Icahn took a slightly-less vitriolic tone and rejoiced at the company’s decision, stating on his corporate blog:

We are happy that eBay’s board and management have acted responsibly concerning the separation — perhaps a little later than they should have, but earlier than we expected.

Major concerns that pushed the decision for separation from Paypal included data over PayPal’s costs and benefits to its partnership and inclusion with eBay. Just last year 41% of eBay’s revenue came from payments rendered by Paypal, while Ebay purchases only made up about 1/3 of every dollar garnered by Paypal. That’s not to undermine the simultaneous growth through their partnership though- as the article by The New York Times and statement by eBay suggests; both companies benefitted significantly from their merge together at first, times have just changed since then, and both companies are conforming to adapt to future challenges.

Paypal’s recent development of adopting new mobile payment options were considered and analyzed against growing industry trends such as transaction rates with partners and future challenges against possible competitors such as apple pay and Bitcoin; though results of that analysis and speculation aren’t nearly as transparent or discussed- and understandably so.

The main takeaways from the separation announcement:

  • Scott Schenkel, currently the CFO of eBay Marketplaces will become the CFO of the new eBay company.
  • Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay company.
  • Dan Schulman is now President of PayPal, and CEO-designee of the standalone PayPal Company following separation.
  • eBay Inc. President and CEO John Donahoe and company CFO Bob Swan will be responsible for leading the separation of each business, with board oversight, but neither will have an executive management role in the new eBay and PayPal companies.
    (Meaning Donahue will be stepping down as CEO next year)

All in all; Investors seemed to be in agreement with the move and the market reflected their optimism as eBay’s stock rose 7.5 percent to $56.63 per share.

What do you think of Donahue’s announcement of stepping down? Although he says it’s his decision, do you think Icahn’s comments might have had something to do with the board’s confidence in Donahue as CEO?

Let us know what you think about eBay and PayPal’s new leadership and what it might mean for the future of these companies in the comments below!

Comments

Adverts

Republic Wireless Relay is a clever walkie-talkie
Leon Hitchens
Best cases for the Essential Phone
Leon Hitchens
Digital Bounds 2017 Holiday Gift Guide
Leon Hitchens

Adverts

Amazon Cloud Cam is an Alexa enabled security camera
Leon Hitchens