PayPalwill be out as EBay’s payment processor in 2020
Auction site gets big boost from investors after revealing new deal with payment processor Adyen
SAN JOSE » eBay and PayPal are taking another step toward divorce. And as is the case in many such separations, one side is the winner and the other is left wondering just how things got to this point.
eBay said Wednesday that PayPal will no longer be its payments processor after the agreement between the two companies ends in 2020. EBay has signed a new, long-term-deal with Dutch payments-services company Adyen, which will start handling a small amount of eBay’s payment processing later this year.
PayPal won’t disappear completely from eBay in two years, however. The companies said PayPal will remain as a payment option on eBay’s Marketplace sites until 2023.
eBay andPayPal have had close ties since 2003, when eBay acquired PayPal. In 2015, eBay spun out PayPal as an independent company.
Along with its Adyen partnership, eBay will take more control of the payments process on its Marketplace sites. The company said that by bringing much of its payments service into its own operations, it will add $500 million in operating earnings after the deal with PayPal comes to a close.
Adyen’s namemay not be well-known in the United States, but the company does count Uber, Netflix and Spotify among the companies that use its technology for processing customer payments. Unlike PayPal, which in addition to providing payment services has a button on eBay sites and elsewhere so customers can use it to pay for purchases, Adyen focuses exclusively on the services that businesses use on the back end of their systems for payment processing.
It was obvious from the start of trading on Thursday how Wall Street viewed the future relationship between eBay and PayPal.
eBay shares rose 13.8 percent, to close Thursday at $46.19, as the company also got a boost from an upbeat fourth- quarter report and outlook.
In contrast to eBay, Pay- Pal shares fell more than 8 percent, to end the day at $78.40.
LateWednesday, eBay reported fourth-quarter earnings of 59 cents a share on $2.61 billion in revenue, in line with analysts’ expectations.
The company also forecast first- quarter earnings of between 52 cents and 54 cents a share, on revenue in a range of $2.57 billion and $2.61 billion, while Wall Street had earlier forecast eBay to earn 52 cents a share on sales of $2.4 billion.
Piper Jaffray analyst Michael Olson said sentiment is growing that the company’s business is improving.
“The promise of an improving customer experience and incremental profits from the payments transition is another favorable component of the story that investors can point to in the coming years,” Olson said, in a research note.