EBay's New Payment Partner Sends PayPal Shares Down

eBay will no longer offer PayPal, so what are you going to do now?

Analysts said that might bring in more revenue for eBay while lowering costs, adding to optimism from a strong holiday quarter for the e-commerce company.

In 2002, eBay paid $1.5 billion to buy PayPal, an online payments company whose founders include Silicon Valley heavyweights Elon Musk and Peter Thiel.

Shares of e-commerce platform eBay Inc surged almost 11 percent on Thursday after it reported strong results and launched a new partnership to take more control of payments on its sites from long-term partner PayPal Holdings Inc.

The two US tech companies have a complicated history.

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The company said it expects revenue in the range of $2.57 billion to $2.61 billion for the fiscal first quarter. Sales and marketing expenses rose 13.3 percent to $689 million. When eBay spun off PayPal in 2015 - something investors and analysts had urged it to do - the payments company's market value was close to $50 billion.

EBay said the transition to full payments intermediation will be a multi-year journey, and that it will try to move as quickly as possible to complete this process, within the parameters of its operating agreement with PayPal, which will remain in place through mid-2020.

"With the announcement that eBay will begin to take over payments on the marketplace from PayPal, this opens up new revenue and profit opportunities over the long term", said Sebastian.

Little-known Dutch firm Adyen will become eBay's primary payments processor under the scheme, which seeks to see more transactions conducted directly on eBay's sites.

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"EBay's decision to reduce PayPal's prominence represents a major setback for PayPal", said Gil Luria, an analyst at D.A. Davidson & Co. Analysts on average were expecting earnings of 52 cents per share, according to Thomson Reuters I/B/E/S. EBay recorded a $2.6 billion loss for the quarter because of a one-time $3.1 billion charge from the recent changes in USA tax laws. It also posted earnings of 59 cents per share.

Fourth-quarter revenue rose 9.1 percent to $2.61 billion.

EBay on Wednesday also announced a $6 billion share buyback program.

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