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Ebay Inc.'s (Nasdaq: EBAY) plans to spin off its PayPal unit has left many on Wall Street salivating over the potential of the stand-alone payments business.
But they should be asking this question: Will Alibaba buy eBay?
"There wasn't really a natural buyer for eBay up until about a week ago," Gil Luria, an analyst at Wedbush Securities, told Bloomberg. "Now there's a heavily capitalized, cash rich, fast-growing company with ambitions of getting into the West that could easily, easily buy it."
The spin-off plan announced today (Tuesday) calls for PayPal to become a separate publicly traded company next year. PayPal will be led by Dan Schulman, the former head of American Express Co.'s (NYSE: AXP) online and mobile payments business. The new eBay CEO will be Devin Wenig, the current president of eBay marketplaces.
Investors approved, sending EBAY stock up about 7.54% on the day to $56.63.
To be sure, the benefits for PayPal are clear. Independence will help PayPal to focus on battling Apple Inc.'s (Nasdaq: AAPL) forthcoming Apple Pay service for a mobile payments market that Citi Investment Research expects to grow from $1 billion last year to $58.4 billion by 2017.
Without the conflict of interest inherent in being owned by eBay, PayPal will have more freedom in seeking payments partnerships with other online retailers, including Amazon.com (Nasdaq: AMZN) and Alibaba.
But eBay? That's a different story.
In an interview with CNBC this morning, even CEO John Donahoe seemed unsure of the benefits of the split for eBay: "Well, perhaps one of the most important new opportunities it gives eBay is control over its own destiny."
In fact, divesting PayPal will leave eBay much more exposed as an e-commerce company squeezed between two giants - Amazon and an ambitious Alibaba.
Sooner or later, eBay will need to be acquired by a larger partner in order to survive, and Alibaba happens to be the ideal partner.
An eBay acquisition makes even more sense from Alibaba's perspective.
Let's just start with the cost...
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.