Sales services site
eBay Inc. and Internet payment gateway giant
PayPal are to go their separate ways. The companies will become independent entities in 2015. The news comes after a review of eBay's growth potential by its Board of Directors. The review concluded a change in business structure was required to maximize future growth. The division will occur in the second half of 2015, and will be subject to regulatory conditions. John Donahoe, eBay's President and CEO, will manage the division alongside the Bob Swan, the company's CFO.
PayPal was an Elon Musk initiative and born of his X.com project in 2001. A system that facilitates ecommerce business payments and money transfers over the Internet, the system's initial success was because of its connection to eBay - another Elon Musk initiative and the Internet's premier consumer-to-consumer sales services solution. The two entities have successfully worked in tandem but the decision to separate them is seen as a move to maximize the strengths of each entity and create sustainable value for shareholders through a sharper focus on each organization's respective businesses.
Devin Wenig will become the new eBay CEO once the division takes place, with Scott Schenkel becoming CFO. Dan Schulman has become the current President of PayPal, and will become CEO following the division. eBay (eBay Marketplaces and eBay Enterprise) generated $85 billion in merchandise sales in the last financial year - an increase of 13% over the previous year, while over the last year PayPal revenue increased by 19%, generating around $7.2 billion.
“eBay and PayPal are two great businesses with leading global positions in commerce and payments,” explained John Donahoe. “For more than a decade eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value. However, 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".
He added, "eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets,” Donahoe continued. “As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities. And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward. Our board and management team believe that putting eBay and PayPal on independent paths in 2015 is best for each business and will create additional value for our shareholders.”
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