Boston, MA 02/04/2014 (wallstreetpr) – The ecommerce giant eBay Inc (NASDAQ:EBAY) is facing a very piquant situation. One activist investor is suggesting that the spinoff would yield more investor value. The ecommerce retailer is showing a very good growth, the payment gateway is also registering a good revenue income. Would the spinoff contributed to sustained growth for two separate entities.
When is 2+2 greater than 4?
eBay Inc (NASDAQ:EBAY) derived 60% of its revenues from the ecommerce platform ebay.com and the balance 40% from the payment gateway PayPal. In a way, both the services are synergistic, ecommerce platforms require payment gateways and vice versa. Both also generate revenues streams apart from each other, not all payments on ebay.com are routed through PayPal and not payments processed through PayPal fall into ebay.com’s coffers. In such a scenario, it may be worthwhile to spinoff the company into two distinct entities so each can grow independent to each other. The important factor would be the profitability of each standalone entity as well as the cost sharing between the two.
Competition Heating Up:
Ecommerce platforms are still in the nascent stage, they account for just 10% of the total purchases made. The market is huge as companies clamber to garner more market share. The competition for eBay Inc (NASDAQ:EBAY) comes from other ecommerce platforms as well as the traditional retailers. Price and service are very important but other factors also play a role. The harsh weather played spoilsport for many traditional retailers during the last quarter. eBay is moving away from its auction based platform to a more stable traditional ecommerce platform. It is tying up with several big retailers. It is now estimated that auction sales account for just 30% of eBay’s revenues.
PayPal is also not free from competition. It faces competition from the various credit card companies. So, the need at eBay Inc (NASDAQ:EBAY) is to define competition. Once the definition is clear, marketing strategies can be worked accordingly.
