As an insider (currently employed at eBay) I can say that there is a very positive vibe going on. Everyone is feeling this is a fantastic achievement and it allows both companies to flourish and compete much more effectively with the current market. We'll still be playing our weekly football matches with a mixture of PayPal and eBay people.

As an outsider, I can't see how Paypal is holding eBay back - mind explaining?

I guess PayPal would hold back eBay because lots of people hate PayPal. When eBay started, each seller would list their preferred payment method. Then eBay bought PayPal and banned the others.

It's more secure. I hate PayPal, but I look for it because I'm wary of copying my card information into yet another store's database to be found by hackers. As a buyer, PayPal is only mildly annoying. After hearing about so many bad experiences, though, I'm wary about selling with PayPal, and by extension eBay.

The only issue I can imagine is Paypal dominating mindshare among top execs. In any other way, this is a huge benefit for Paypal but a pretty pedestrian move for eBay, IMO.

Another outsider guessing: A lot of Ebays profits are reinvested into PayPal leaving only little for the development of the Ebay marketplace.

Sorry, can't comment on that, but there are some really good reasons behind it.

I still find it interesting that eBay went for this. Their platform and business will be far weaker without the moat of PayPal around it. It would be as if Microsoft spun off Office back in 2002.

Minus PayPal, they have zero growth and half the net income.

It leaves eBay extremely vulnerable to acquisition. And with zero growth, their PE ratio will compress significantly. Probably from today's ~27 down to 15-18 range. eBay's auction platform got to ride on the growth halo of PayPal to a higher multiple on its earnings. Alibaba should obviously acquire them to use as a leverage point for the US market, including for the benefit of their 11 Main product.

The only upside I can see for eBay in this, is that maybe the smaller company will become more dynamic and innovative. That's only if it can remain independent, which is very unlikely with no growth. After a short while eBay investors will get very frustrated, that'll push toward a business sale.

PayPal's future is obvious, they'll be acquired by one of the financial or tech giants.

"PayPal's future is obvious, they'll be acquired by one of the financial or tech giants."

WRT the tech giants, who will toss out their existing wallet first? Five to twenty years ago, everyone who wanted a paypal-killer created their own. Far more likely some financial giant will buy them, the only question there is a retail bank (every checking account at XYZ bank is now a paypal account) or a service provider (every XYZ credit card is now a paypal account). Also tech giants are not so good at nickel and dimeing and adding crazy fees while providing poor customer service, but thats all financial companies do, so the fit is much better.

I'd have thought a credit card (i.e. old-school payments processing) company would be the more likely suitor than a bank. After all, Visa and Mastercard were IPO'd off by the banks that used to own them.

PayPal are going to be doing the acquiring for a bit, they are quite large to be acquired. They have already been buying eg Braintree to consolidate, and now they will have more cash for acquisitions.

Ebay needs to do something, maybe being acquired is best. If it is not Alibaba maybe its Google...

I could see Amazon throwing its hat in the ring for eBay- it would make sense considering their business model and I think a lot of eBay shops would be happy to let Amazon handle the packing and shipping portion of selling.

I would hope that Amazon seeking to buy eBay would be blocked on competition grounds.

The reasons are much simpler, albeit speculative. Paypal can be sold without impact ebay, or vice versus. Or avoid potential anti-trust, such as Microsoft in 90s. It's obvious ebay/paypal have huge monopoly business advantage than separated.

A bonus benefit, without ebay auction obligation, paypal may innovate more rapidly in the financial business.

Where did this meme about Meg Whitman being bold and decisive come from? Everything I've heard on her was that she arrived at the right time. A friend of mine that worked at eBay at the time said something along the lines of "A monkey could have made eBay work at the time."

Anyone else find her a compelling and effective CEO?

I don't think a monkey would have burned $2b on a non-sensical Skype purchase. So she's got that going for her.

That's a great point - I forgot to include the negative value part of the equation.

PayPal gets to expand (eBay's competitors have avoided using PayPal because of its parent), and eBay gets a one-time mega-paycheck it can use to pivot, acquire other companies, marketing-blitz, or otherwise rejuvenate the brand. Sounds like a good plan to me.

Ebay is just giving Paypal shares to its shareholders—it isn't selling Paypal. It is, however, sending Paypal off with a big wad of cash.

They owned PayPal first. The Skype acquisition was very suspicious though. It served no purpose to their core business despite their laughable attempt to hype it as a tool for buyers and sellers to communicate. I suspect that it was done to take the heat off pressuring them into bank regulation in return for cross-correlating certain Skype accounts with PayPal registered bank accounts.