Envisioning a Leaner, Lighter eBay
Tuesday, January 13, 2009
Investing blogger looks at the possibilities
What would eBay be like if it were disencumbered of brand extensions such as eBay Motors or vertical integrations such as Skype or Pay Pal? In his fourth and (he says) final installment on all things eBay, The Street.com's Jim Cramer, writing for Blogging Stocks, shared his thoughts today:
This week I envisioned an eBay (NASADQ: EBAY) without Skype, eBay Motors and Paypal. Everything goes to the highest bidder, excluding handling and delivery of course.
While eBay might benefit from selling Skype and Motors, considering they might be worth more to others like Cisco Systems (NASDAQ: CSCO) and AutoNation Inc. (NYSE:AN), it should not sell PayPal unless it is contemplating a merger, since the acquiring company most likely would want PayPal to be an integral part of any deal.
eBay is going through some growing pains right now but it is still a primary center of activity on the web. Although there are many disgruntled sellers that have left the site or been forced off because of the constant changes in the rules, it really has only one main rival and that is Amazon.com (NASDAQ: AMZN).
Over the course of time, these sites will become more alike than they are different. Amazon evolved from an on-line book seller into the largest retailer on the web. Ebay has evolved from a mom and pop auction and trading site to an outlet for selling everything under the sun. And the barriers to entry seem high for a third player in this space, although the market has been surprised before.
It seems to me that eBay has done a poor job of interfacing with the disenchanted. On the other hand eBay is not a baby sitter for these businesses. If the business is not viable on eBay then perhaps it might be viable on another site. If it is not viable on another site, well, then maybe it is not really viable, or it's viability has diminished. The frequent users of eBay that I have spoken to think the site has become "cleaner and easier to use". But that is only a small sampling and may prove nothing.
Despite all the criticism being flung at eBAy it remains a strong business. I would even argue that eBay, right now, is a far better investment than it's rival Amazon.
Ebay is trading at a P/E ratio of 7.7 while Amazon is trading at a P/E of 29, ridiculous by my book; see Amazon downgraded by Citi -- call me at $30.
eBay has acquired other companies over the years that have contributed to its bottom line and overall growth. These include Half.com, Rent.com, Shopping.com, Stub-Hub and StumbleUpon. This process will not stop. Every company goes through growing pains and eBay is much less traditional than Amazon in a very tough market place.
ATR wants to know what you think. Is eBay better off as a more focused company? And is Cramer right that the barrier of entry is so high that no other player can emerge to effectively challenge the hegemony of eBay and Amazon? We'd love to hear your comments.
What would eBay be like if it were disencumbered of brand extensions such as eBay Motors or vertical integrations such as Skype or Pay Pal? In his fourth and (he says) final installment on all things eBay, The Street.com's Jim Cramer, writing for Blogging Stocks, shared his thoughts today:
This week I envisioned an eBay (NASADQ: EBAY) without Skype, eBay Motors and Paypal. Everything goes to the highest bidder, excluding handling and delivery of course.
While eBay might benefit from selling Skype and Motors, considering they might be worth more to others like Cisco Systems (NASDAQ: CSCO) and AutoNation Inc. (NYSE:AN), it should not sell PayPal unless it is contemplating a merger, since the acquiring company most likely would want PayPal to be an integral part of any deal.
eBay is going through some growing pains right now but it is still a primary center of activity on the web. Although there are many disgruntled sellers that have left the site or been forced off because of the constant changes in the rules, it really has only one main rival and that is Amazon.com (NASDAQ: AMZN).
Over the course of time, these sites will become more alike than they are different. Amazon evolved from an on-line book seller into the largest retailer on the web. Ebay has evolved from a mom and pop auction and trading site to an outlet for selling everything under the sun. And the barriers to entry seem high for a third player in this space, although the market has been surprised before.
It seems to me that eBay has done a poor job of interfacing with the disenchanted. On the other hand eBay is not a baby sitter for these businesses. If the business is not viable on eBay then perhaps it might be viable on another site. If it is not viable on another site, well, then maybe it is not really viable, or it's viability has diminished. The frequent users of eBay that I have spoken to think the site has become "cleaner and easier to use". But that is only a small sampling and may prove nothing.
Despite all the criticism being flung at eBAy it remains a strong business. I would even argue that eBay, right now, is a far better investment than it's rival Amazon.
Ebay is trading at a P/E ratio of 7.7 while Amazon is trading at a P/E of 29, ridiculous by my book; see Amazon downgraded by Citi -- call me at $30.
eBay has acquired other companies over the years that have contributed to its bottom line and overall growth. These include Half.com, Rent.com, Shopping.com, Stub-Hub and StumbleUpon. This process will not stop. Every company goes through growing pains and eBay is much less traditional than Amazon in a very tough market place.
ATR wants to know what you think. Is eBay better off as a more focused company? And is Cramer right that the barrier of entry is so high that no other player can emerge to effectively challenge the hegemony of eBay and Amazon? We'd love to hear your comments.
posted by Chris and Frank at 3:57 PM
3 Comments:
Ebay will be a better company when they figure out how to strike a balance between Wall Street and Main Street. Sure they need to make investors happy but those investors will one day feel the pain when a competitor comes along that really grabs a large chunk of their customers. It is only a matter of time.
Lois, New York, NY
I don't think it makes any sense for ebay to get rid of ebay motors. As more dealers shut down eBay motors will be the one left standing. Ebay is also making great tools for 3rd party application developers like us (http://findyourauto.net), watch for great things to come over the next few year through this initiative from ebay. Skype is another story altogether, it does not contribute to ebay's core business in any shape or form. But is this the right time to offload it?
VJ,
We're with you on this one. Skype has been an odd fit for eBay ever since they acquired it. All talk of live VOIP connections facilitating better buyer-seller connections aside, it just doesn't seem to fit. eBay Motors, on the other hand, is a logical extension of the brand. It might hold value as a spin off (i.e. it would generate cash in a sale) but it seems to be underappreciated by Jim Cramer. All he has to do to really "get it" is consider the big bucks changing hands this week at the Barrett-Jackson event in Scottsdale.
MUCH THANKS FOR YOUR COMMENT!
Chris & Frank
Post a Comment