EBay CEO: Com­pany will emerge stronger af­ter tough 2016 for tech

The Pak Banker - - COMPANIES/BOSS -

Since the start of the year, the mar­kets have been un­for­giv­ing to tech­nol­ogy stocks. As of clos­ing prices on Tues­day, Ap­ple AAPL -0.80% shares were down nearly 10%, Ama­zon.com AMZN +3.25% is down 26.8% and LinkedIn is down a crush­ing 55%. eBay EBAY +1.45%, com­ing off a fourth quar­ter of lit­tle growth, had dropped more than 19%.

"There are a lot of ques­tions out there and I don't have any of the an­swers," said eBay CEO Devin Wenig to open up his talk at the Gold­man Sachs Tech­nol­ogy And In­ter­net Con­fer­ence on Wed­nes­day. "There are re­ally great com­pa­nies get­ting hit hard."

While Wenig stopped short of declar­ing a Sil­i­con Val­ley dooms­day sce­nario, he sug­gested that the bankers, in­vestors and an­a­lysts in the con­fer­ence room at San Fran­cisco's Palace Ho­tel should brace them­selves for a po­ten­tially rough 2016, where a pull back in cap­i­tal could squeeze both pri­vate and pub­lic com­pa­nies. He likened the pe­riod to the be­gin- nings of the re­ces­sion in 2008, call­ing it a "painful" process that the in­dus­try has seen be­fore with "stronger com­pa­nies emerg­ing stronger."

Wenig is hop­ing that in­ter­net vet­eran eBay can be one of the com­pa­nies to come out on top. Though its 2015 fourth quar­ter re­sults show stag­nat­ing rev­enue, the eBay CEO fo­cused on the pos­i­tives of his busi­ness, which con­tin­ues to ex­hibit strong mar­gins and projects free cash flow for 2016 to be any­where from $2.2 bil­lion to $2.5 bil­lion. EBay, un­like the "hun­dreds of busi­nesses that were formed in e-com­merce that are not busi­nesses," has strong un­der­ly­ing fi­nan­cials, Wenig em­pha­sized with­out nam­ing chal­lengers like Fab and Gilt Groupe, whose poor fi­nan­cials and high cap­i­tal burn rates led to less than fa­vor­able ex­its.

EBay's CEO also used his 40-minute talk to po­si­tion the com­pany as one in tran­si­tion. Fol­low­ing its split from PayPal last year, the com­pany is fo­cus­ing on new ef­forts to think more as "mer­chan­diser or re­tailer" as op­posed to just an open mar­ket­place. That will in­volve shifts to the eBay plat­form, which Wenig ad­mit­ted was cur­rently too com­plex, as it looks to show more rel­e­vant prod­ucts to cus­tomers as op­posed to sur­fac­ing a del­uge of op­tions that haven't been cu­rated.

"We're chang­ing from an un­struc­tured to highly struc­tured mar­ket­place," said Wenig, who added that the changes will marginally "hurt" eBay in 2016. "That's not easy and it takes time."

One thing eBay will not be do­ing, how­ever, is chas­ing Ama­zon. Though Wenig only men­tioned his main com­peti­tor once by name dur­ing the talk, plenty of his state­ments were tinged with the idea that eBay is fun­da­men­tally dif­fer­ent from the Jeff Be­zos-led on­line re­tailer. He dug into Ama­zon's con­tin­ued in­vest­ment in in­fra­struc­ture at the sac­ri­fice of mar­gin, not­ing that "other com­pa­nies ground their value propo­si­tion in lo­gis­tics" while eBay was fo­cused on choice. The av­er­age ship­ping time for an eBay or­der is three days, he added, stat­ing that the com­pany's goal was to be "just good enough" on get­ting prod­ucts to cus­tomers while of­fer­ing them the most op­tions for prod­uct.

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