![]() ![]() In 2015, eBay announced it would spin out PayPal as a separate entity. And as eBay started to feel the effects of a decade of muddled leadership, PayPal looked at a future beyond the e-commerce platform, but first it would need to separate. ![]() In that time, PayPal spent $800 million to acquire Braintree and Venmo, bolstering its position as a provider of financial services. A few months after the IPO, eBay agreed to acquire PayPal for $1.5 billion.įor the next decade, PayPal coexisted inside eBay’s rather tumultuous world, in which the e-commerce platform tried to expand into every internet business, acquiring Skype and a range of classified advertising networks. PayPal provided its platform to all websites, but the bulk of its transactions were conducted on eBay. 's Troy Wolverton contributed to this report.After Musk left, Peter Thiel took over as CEO as guided PayPal towards its 2002 IPO. eBay will announce complete second-quarter results July 18. International sales rose 148 percent year over year. auctions business, which grew 48 percent year over year. eBay said it was particularly helped by its U.S. Analysts had been expecting the company to report a profit of 17 cents per share on sales of $264 million, according to First Call. Separately, eBay on Monday announced preliminary results for its second quarter, posting a profit of $54.3 million, or 19 cents per share, on sales of $266 million. But, because of charges of $13 million per quarter for stock-based compensation and amortization of intangible assets, the deal will cut into net earnings per share. eBay expects the deal to be a boost to pro forma earnings. The purchase price will include around $18 million in acquisition-related costs. That is a 15 percent premium over PayPal's Friday close. That values each PayPal share at about $23.61, based on eBay's Friday closing price. The deal calls for PayPal shareholders to receive 0.39 shares of eBay for each share of PayPal. Baldauf said the premium eBay paid for PayPal was "modest." Wall Street analysts said eBay paid a fair price. While eBay generally reports gross margins in the 80 to 83 percent range, executives estimated that PayPal's margins, if they were calculated using the same formula, would be around 45 percent. PayPal reported reaching operating profitability before it went public, and last month the company said it expected to report second quarter revenue of $53 million to $54 million, with pro forma earnings per share of 8 cents to 9 cents. PayPal has a "better mix," Dutta said, and therefore lower costs. One reason the service was not making money is that its customers are more likely to use credit cards to access the service, which costs eBay more money than if they use bank accounts. "The combination of the two networks should expand both platforms while minimizing shared operational costs," eBay said.īillpoint was losing around $10 million to $15 million per year, according to eBay's Dutta. The deal is also likely to help eBay's bottom line. ![]() In a research report last year, Pacific Crest Securities estimated that eBay would garner more than $7 million in revenue for each point of market share it took from PayPal in 2002. PayPal also faces several class-action lawsuits from customers who claim the company illegally froze their accounts.ĮBay's biggest goal right now should be improving PayPal's somewhat poor reputation for customer service, said Forrester Research retail analyst Carrie Johnson. A few states have begun to question whether the business constitutes illegal banking or money-transmitting services. PayPal also brings other problems to the table. Citibank recently said it would stop allowing its credit cards to be used for online gambling, and a bill is currently pending in Congress that would ban online gambling. Dutta said the move is due to the "uncertain legal situation" around online gaming. PayPal will continue to offer its service as an independent brand, but there are some changes ahead.ĮBay Chief Financial Officer Rajiv Dutta said eBay will discontinue PayPal's online gaming business, which was expected to account for 10 percent to 15 percent of total revenue in fiscal 2003. ![]()
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