For more than a decade, eBay and PayPal have been together. In fact, PayPal has always been regarded as one of the crown jewels of the world’s largest online marketplace.
However, soon both the companies will part ways as a recent press release from eBay says that the company is planning to spin off PayPal into a separately traded company by 2015. The move could be a direct result of the continued efforts from billionaire hedge fund manager Carl Icahn who advocated that shareholders will benefit to a great extent from such a split.
Over the past one year, eBay and Icahn were fighting a lengthy battle where the central focus was PayPal. Icahn was of the opinion that splitting up PayPal into a separate company would be able to generate better value to the shareholders. However, eBay was adamant to keep both the companies together.
But, it looks like eBay realized that both the companies will be better off being separate as today’s press release from the company says that the split will put both the companies in competitive positions. This
will further allow each entity to focus on its own strategies, without having to worry about conflicting each other’s interest.
In short, splitting up PayPal and eBay will provide greater flexibility and opportunities to each company in the industry.
Over the past few years, things are getting competitive in both, the ecommerce industry as well as payment industry. Although, eBay has done well in the past few years, its growth has been slow. So, the ecommerce giant has to come up with new strategies to speed up its expansion.
On the other hand, PayPal’s growth has been quite remarkable. The total accounts grew by 15% year over year and the growth in revenue in the last 12 months has been around 19%. As a result the total revenue has increased to $7.2 billion this year.
However, the payment industry is not as simple as it used to be and new competitors like Apple Pay will definitely pose a threat to existing companies like PayPal. Although PayPal is one of the most used and trusted online payment companies currently in the market, the arrival of Apple Pay, which allows users to pay via their iPhones could make things harder for the payment service.
Given that Apple Pay debuts in 2015, splitting up PayPal into a separate entity could be smart move by eBay.
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