Icahn Floats PayPal Spinoff as eBay Posts Mixed 4Q
EBay (NASDAQ:EBAY) logged a slightly better-than-expected 13% jump in fourth-quarter earnings on Wednesday and also revealed a push by billionaire investor Carl Icahn to separate the tech giant’s PayPal division.
Despite a slight revenue miss, Wall Street drove shares of the PayPal parent sharply higher in after-hours trading on the Icahn proposal as well as news of a $5 billion buyback program.
The company reported net income of $850 million, or 65 cents per share, last quarter, compared with a profit of $751 million, or 57 cents a share, a year earlier.
Excluding one-time items, eBay said it earned 81 cents a share, a penny better than forecast.
Revenue jumped 13% to $4.53 billion, compared with the Street’s view of $4.55 billion. Total company-enabled commerce volume jumped 22% in the fourth quarter, up from 21% the year before, to $61 billion.
"We feel good about our performance and strong finish in the fourth quarter, with the holiday shopping season clearly showing how online, mobile and other omni-channel commerce capabilities are changing how consumers shop and pay," eBay CEO John Donahoe said in a statement.
EBay said mobile users accounted for 40% of the company’s 36 million new users and accounts in 2013.
Meanwhile, eBay said it received a proposal from Icahn to spin off the company’s lucrative PayPal business into a separate company. The idea is one that investors have been pushing for and is likely to add to pressure on eBay's management and board.
The company said it has “explored in depth” a potential spinoff or separation of PayPal, but has concluded such a move is not "the best way to maximize shareholder value.” EBay said it is able to leverage eBay’s technology capabilities, commerce platforms and ties to retailers, brands and large merchants.
Icahn, who has a stake of about 0.82% in eBay, also nominated two of his employees to the company’s board of directors. EBay said it will consider the nominations “in the ordinary course of business.”
After repurchasing about $254 million of common stock during the fourth quarter, eBay also announced a $5 billion buyback program on Wednesday.
Looking ahead, eBay projected 2014 non-GAAP EPS of $2.95 to $3.00, compared with the Street’s view of $3.12. First-quarter non-GAAP EPS is seen ranging between 65 cents and 67 cents, which is below consensus calls from analysts for 72 cents.
Despite the cautious guidance, shares of San Jose-based eBay soared 9.19% to $59.41 in extended trading on Wednesday.