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 EBay, which bought PayPal for $1.5 billion in 2002 and has
considered hiving off the multibillion-dollar payments service,
argued on Wednesday that the business would lose synergies with the
overall e-commerce business as an independent unit.
Some analysts, however, said that operating as a separate entity
would encourage other online retailers to adopt the service and help
retain key executives, with a spinoff that could unlock the value of
a service that processed $180 billion in 2013 payments.
Icahn was not immediately available for comment.
Shares of Ebay, which also reported earnings per share a penny above
Wall Street expectations, jumped as much as 12 percent. The stock
was up 7 percent at $54.41 after hours.
"I expect it to be a battle," BGC Partners analyst Colin Gillis
said, citing eBay's longstanding opposition to a PayPal spinoff.
"One of the reasons for that is because for commerce and payments,
you need to remove as much friction from those two systems as
possible. If you separate it out, you put more friction between"
them.
PayPal started life as an independent company, founded in the late
1990s by technology entrepreneurs including venture capital investor
Peter Thiel.
Icahn's proposal comes as the billionaire investor is urging Apple
Inc <AAPL.O> to share more of its $146 billion cash pile with
shareholders. The activist is demanding Apple do an additional $50
billion in share buybacks, which the company is advising
shareholders to reject.
E-COMMERCE SUPREMACY
PayPal battled with eBay for supremacy in the emerging online
payments market. But soon after it went public in 2002, eBay
acquired PayPal for $1.5 billion. Today, its growth outpaces the
rest of the company and it accounts for a large chunk of eBay's
overall stock market value.
"Payment is part of commerce, and as part of eBay, PayPal drives
commerce innovation in payments at global scale, creating value for
consumers, merchants and shareholders," eBay said in a statement on
Wednesday.
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Icahn, who earlier this month bought shares and derivatives giving
him a 0.8 percent economic interest in eBay, also nominated two of
his employees to the eBay board. Those employees were not
identified.
Revenue at eBay's PayPal division rose 19 percent during the holiday
quarter, fueled by the growing use of mobile phones to shop.
PayPal's total payments volume, a gauge of how much it is used to
complete a transaction, rose 25 percent to $180 billion worth of
transactions.
Companywide, revenue rose 13.5 percent to $4.53 billion for the
quarter ended December 31.
For 2014, eBay forecast revenue of between $18 billion and $18.5
billion, while analysts expected a forecast of $18.5 billion,
according to Thomson Reuters I/B/E/S.
Net income for the fourth quarter was $850 million, or 65 cents a
share, up from $751 million, or 57 cents a share, a year earlier.
Excluding some items, eBay earned 81 cents per share, a penny better
than expected.
On Wednesday, the company also said it had authorized an additional
$5 billion in stock buybacks.
(Additional reporting by Dhanya
Skariachan in New York; writing by Edwin Chan; editing by Bernard
Orr)
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