Analysts: EBay faces competitive threat
By DAN GOODIN, AP Technology Writer
Thu Jul 6, 7:19 PM ET
EBay Inc. faced a double blow Thursday as it announced a key executive's plans to leave and an analyst said Google Inc.'s new online payment service represents a bigger threat than expected to the Internet auction company's health.
Jeff Jordan, who most recently was president of eBay's PayPal payment business, led eBay's North America division from 2000 to 2004 and had been presumed by some analysts as the likely successor to Chief Executive Meg Whitman. He said in an interview that he wants to spend more time with his wife and two children.
He will be replaced by Rajiv Dutta, who has been with the company since 1998, serving as chief financial officer, head of strategy and president of Skype, the Internet phone service eBay acquired last year.
The San Jose-based company's shares fell $1.51, 5.3 percent, to $26.85 on the Nasdaq Stock Market following analyst reports that voiced concern about eBay's long-term position.
One report, by Lehman Bros. analyst Douglas Anmuth, said Jordan's departure was "highly significant" because it comes as eBay is facing new challenges and competitive threats.
"We view the senior management changes announced today with concern as they come at a critical time for eBay as it seeks to stimulate growth in its core markets while integrating various acquisitions," he wrote.
Besides eBay's $2.6 billion purchase of Skype, the company last year bought Shopping.com for $685 million.
Whitman said in an interview that she was undaunted by Jordan's departure, noting that Dutta and other executives taking new roles were well acquainted with eBay's business.
"EBay has very deep management bench strength," she said, calling that "a testament to the strong management team that's been built over the last five or six years."
The disclosure of Jordan's plans came the same day that another analyst, Citigroup's Mark Mahaney, cut his earnings growth estimates for eBay, based on his analysis of Google Checkout, an online payments service unveiled last week. Mahaney slashed his target price for eBay to $40 from $51.
Mahaney said he found Checkout, which has been under development for less than a year, to be faster, easier and less expensive than PayPal.
"As we see it, this speaks volumes about Google product development skills and PayPal's lack of innovation," Mahaney wrote.
"As the growth potential of PayPal off of eBay has been part of our core investment thesis on the stock, we view this Checkout development as materially raising eBay's risk profile."
Dutta responded that PayPal, with more than 105 million account holders, remained the uncontested leader in a terrain fraught with risks.
"People will tell you that launching a payment service is complex," he said. "As with any competitor we will pay a lot of attention to what anyone does in this space."
Dutta declined to say whether eBay intended to lower PayPal's fees to address the price differences noted in the report.
Mahaney's report came a day after eBay added Google Checkout and about a dozen other services to a list of payment systems the auctioneer does not permit its users to accept.
Google's offering got added because it doesn't meet eBay's requirement that accepted services have a "substantial historical track record" of transactions that are not prone to error, fraud and other types of abuse, eBay spokesman Hani Durzy said. He added that eBay wouldn't rule out adding Google Checkout or other banned services to the accepted list in the future.
Google spokeswoman Megan Lamb said Checkout is secure. "We rigorously tested this new service before launch and have used this same service to process Google Video, Google Earth, Google Base, and Google Store transactions for months," she said in an e-mail.
Among the other management changes, Alex Kazim, currently vice president of products for Skype, will assume Dutta's role as president of Skype.
Former Shopping.com CEO Lorrie Norrington is becoming president of eBay International. She replaces Matt Bannick, who will oversee eBay's initiatives in corporate philanthropy and the developing world.