Analysis: Thompson exit puts focus on PayPal spin-off

Thu Jan 5, 2012 7:48am EST
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By Alistair Barr

(Reuters) - The surprise departure of PayPal President Scott Thompson from eBay Inc could seriously set back any moves to spin-off the payments business as a separate company, investors and analysts said on Wednesday.

Thompson was named chief executive officer of Yahoo! Inc. EBay Chief Executive John Donahoe said in an internal memo that he was told about the move on Tuesday and was shocked.

EBay shares closed down 3.8 percent at $30.16 on Wednesday.

The decline was partly driven by Donahoe's admission that Thompson's departure was a shock, but the stock was also weak because a PayPal spin-off is less likely now, according to RJ Hottovy, an equity analyst at Morningstar.

"I don't think we will see a spin-off any time soon. The departure of Thompson puts that even further into question," Hottovy said.

PayPal started life as an independent company, founded in the late 1990s by technology entrepreneurs, including venture capital investor Peter Thiel. The business 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.

Thompson, a veteran of the electronic payments business, led PayPal from early 2008. During that time total payment volume jumped 26 percent a year to over $120 billion, while the number of users more than doubled to at least 104 million.

Meanwhile, eBay's main online Marketplaces business struggled to keep pace with Inc and the growth of e-commerce in general.   Continued...