Last eBay results before split reveal PayPal’s better fortunes

The diverging fortunes of eBay’s online commerce business and its PayPal payments division were underlined on Thursday in the final quarterly results before the company splits in two.

While PayPal’s revenues grew at 16 per cent in the second quarter, slower customer activity and the fallout from a cyber attack last year led to revenue declines at the eBay marketplace.

The combined company also said it will take a near-$800m writedown on its eBay Enterprise business, which it has agreed to sell to a consortium led by the private equity firm Permira for $925m.

Devin Wenig, who will take over as chief executive of eBay after the split at the end of this week, said the shopping website was still struggling to win back users affected by the cyber attack in May last year. That incident forced the company to advise its 150m users to change their passwords.

The retail side of the company is also trying to improve the visibility of its product listings, launching “hundreds of thousands of new pages” to improve eBay’s rankings in search results, he said.

“Our absolute priority is to improve our competitive position and to drive more stable profitable growth over the long term,” Mr Wenig told analysts on a conference call.

The split will become effective on Friday with formal trading in new eBay and PayPal shares beginning on Monday — but there has been an unofficial market in the two stocks since last week, with PayPal outperforming its former parent.

That market valued PayPal at $45.4bn at the close of trading on Wednesday, compared to $31.5bn for eBay. In trading before the stock market opened on Thursday, eBay was up a further 2.3 per cent and PayPal rose 3.2 per cent.

Analysts have been tipping PayPal as a growth stock and a potential beneficiary from merger and acquisition activity in the fast-changing payments industry. Ebay’s prospects rest on improving its competitive position against Amazon and other rivals, and on its ability to return cash to shareholders.

The retail side of the company said on Thursday that it would add another $1bn to its existing $2bn share buyback programme.

The goodwill impairment charge of $786m came from the sale of the eBay Enterprise business, which manages websites for other retailers, to the consortium of Permira, Sterling Partners and Longview Asset Management. EBay acquired the business, formerly called GSI Commerce, for $2.4bn in 2011. The business suffered a blow earlier this month when Toys R Us, a large customer, said it would start to run its own website.

The combined eBay and PayPal posted revenues up 7 per cent to $4.37bn for the second quarter, and adjusted earnings per share that came in ahead of forecasts at 76 cents. The expectation was 72 cents a share.