PYMNTS-MonitorEdge-May-2024

eBay Is Leaving Enterprise Behind

On Thursday (July 16), eBay officially confirmed during its quarterly earnings call what sources had revealed only days earlier: the eCommerce conglomerate will divest its eBay Enterprise operations as it readies for the PayPal split.

The company announced that it would be selling its enterprise business to a consortium of buyers led by private equity firm Permira in a $925 million deal. According to analysts, the sell-off is likely a way for eBay to get rid of unnecessary burdens ahead of its divorce with PayPal – a separation set for Friday (July 17), and to be finalized over the weekend when on Monday, PayPal will begin trading on its own.

Expectations for PayPal are high. According to reports in Reuters, some analysts are already valuing the payments technology firm at $40 billion. eBay, on the other hand, has a less lofty outlook.

“eBay will not grow nearly as fast as PayPal but it is a very profitable business that generates tremendous amounts of cash – some of which they will be able to return to shareholders,” said Wedbush Securities analyst Gil Luria in an interview with Reuters following eBay’s earnings report.

As far as the future of the eBay Enterprise unit, the firm’s president Craig Hayman remained optimistic in a blog post published Thursday. “We believe this deal will give us the most opportunity to continue focusing on our areas of proven strength and help our clients win in an incredibly evolving market,” he wrote. “Rest assured, eBay Enterprise remains committed to its clients.”

He added that the consortium of buyers will reveal more details about future plans for eBay Enterprise when the deal closes, which is expected to happen later this year.

A Sluggish Asset

Reports had emerged as early as January of this year that eBay was looking for a buyer for its enterprise operations.

Earlier this week Reuters reported that Thomas H. Lee Partners LP was in “advanced talks” to acquire the assets for as much as $1 billion, according to unnamed sources. They added that while Thomas H. Lee outbid competing offers, discussions had reached a standstill over pricing disagreements. It was not immediately clear whether Thomas H. Lee remains a part of the deal, which includes Sterling Partners, Longview Asset Management and Sterling Partners portfolio company, Innotrac Corporation.

Now confirmed, the divestiture of the firm’s enterprise arm, analysts added, may help the company maintain more momentum without the PayPal fuel behind its growth. eBay’s enterprise unit, formerly named GSI Commerce, was acquired by eBay in 2011 in a $2.4 billion deal. It has remained the company’s smallest segment and has seen dwindling numbers among its corporate buyer and supplier users, especially as rivals like Amazon and Alibaba strengthen their own B2B eCommerce strategies.

According to reports, toy giant Toys “R” Us decided to end a nearly decade-long relationship with eBay Enterprise only days ago to launch its own B2B eCommerce portal. Reports in The Wall Street Journal announcing the split called the news “inopportune” considering eBay’s then-alleged efforts to divest its enterprise assets.

Still, the B2B side of eBay hasn’t been a complete bust. Its reputation in the B2B eCommerce world remains strong, with Forrester Research naming the company as a market leader in its latest Forrester Wave report, published Tuesday (July 14).

The financial data aren’t too shabby, either. In January, eBay announced that its business clients had surpassed $1 billion in sales through the platform, while simultaneously revealing a new partnership between eBay Enterprise and Microsoft Azure as well as Joyent to strengthen cloud-based eCommerce hosting services.

The unit’s Q1 2015 results revealed revenue growth of more than $288 million, adding more than 200 new business clients.

During its better-than-expected Q2 2015 earnings call, eBay reported a $786 million impairment of goodwill based on the enterprise unit divestiture. Overall, the company said it was “very pleased” with its quarterly performance, which saw $4.4 billion in revenue. The company said it expected its net revenues to grow as much as 5 percent for the full year.

PYMNTS-MonitorEdge-May-2024