EBay Inc, struggling to compete in a crowded and slowing e-commerce market, envisions a remaking the company by galvanizing growth at its nascent PayPal payments system, its top executive said on Wednesday.
Chief Executive John Donahoe said at the company's annual analyst day that changes to its slowing marketplaces business were overdue and pledged to accelerate the pace.
PayPal President Scott Thompson told a throng of analysts and investors that he expected the online payments arm to double its business within two years. Executives said eBay secured an agreement with Research in Motion Ltd to be the exclusive payments system for a growing family of mobile applications on the popular Blackberry smartphone.
And eBay will throw open its PayPal platform to a thriving community of applications developers, allowing them to craft applications for use with a variety of online media and products, hoping to expand its adoption around the world.
We believe it will be bigger than marketplaces because its target audience is all of e-commerce, Donahoe told analysts. The core eBay business must change and it will.
EBay shares jumped 3.8 percent, slightly outpacing a 3.4 percent rally in online retail rival Amazon.com Inc.
The online auctions leader, which also operates Web-based telephone company Skype, is trying to convince Wall Street it remains a vibrant player with growth still ahead.
Investors questioned how the San Jose-based company can boost its performance in a deepening recession and fend off Amazon.
Donahoe warned that growth at its marketplaces division -- the company's main profit and revenue driver, which sells everything from cars to appliances online -- would slow in 2009, be flat with the e-commerce market in 2010, but grow faster than that market in 2011.
EBay executives, addressing Wall Street's criticism, were frank on Wednesday in admitting the firm's reluctance to innovate and its subsequent loss of market share.
We were too slow in our approach to change. We were letting everyone into the marketplace regardless of the experience they gave to buyers, Marketplaces chief Lorrie Norrington said.
We have to do more and we have to do it faster, she added, citing more protection for top buyers and greater exposure for high-quality sellers.
She said lowering listing fees, which invites more sellers in, would persist.
Norrington also said another huge opportunity exists in the secondary market of liquidators selling excess merchandise, calling it a $500 billion global market.
In January, eBay issued a weaker than expected forecast for its first quarter and declined to provide a view for the full year, raising fears it would not soon see an improvement in its main auctions business.
Gross merchandise volume, or the total value of goods sold on eBay, slid 4 percent in the fourth quarter on a currency- neutral basis, excluding vehicle sales. Analysts therefore believe eBay is ceding market share to rivals.
Donahoe vowed on Wednesday to galvanize his company.
The eBay you knew is not the eBay we are, or the eBay we will become, Donahoe said.
Still, the global company has seen its shares lose two- thirds of their value since last year.
EBay shares are valued at about 7 times estimated 2009 earnings, at a deep discount to Amazon's 42 times.
In a possible reference to its rival, Donahoe said: We are not a retailer. We do not aspire to be a retailer.
In past years, eBay has bought classified ads businesses around the world to diversify from auctions, while some analysts and investors have pushed for the company to spin off either its PayPal or Skype divisions.
We're done apologizing for Skype, Donahoe said.
He added that the company would make the right decisions to maximize Skype's value.
EBay shares were 42 cents higher at $11.52 in afternoon trading..
(Editing by Edwin Chan and Andre Grenon)