After imposing disruption on the eBay Marketplaces since becoming CEO in 2008, John Donahoe is now facing the possible disruption of his company from without, and he asked employees not to get distracted. Donahoe and the eBay board are in the crosshairs of one of the most controversial figures on Wall Street, Carl Icahn, who wants two positions on eBay’s board and has submitted a non-binding proposal for eBay to spin off PayPal into a separate company.
On Wednesday, Donahoe sent a letter to employees that asked them not to let the Icahn proposals become a distraction. PayPal President David Marcus also sent a letter to employees, as did President of eBay Marketplaces Devin Wenig.
But there’s plenty to distract employees as Icahn went on the offensive, blasting eBay in interviews for not spinning off PayPal, calling it a “no brainer” decision.
But is the proposal an indictment of eBay management? Bloomberg broadcast a sound bite from Carl Icahn during an interview with RedEnvelope.com founder Scott Galloway: “There’s nothing wrong with the management of Apple, let me get it straight. I can’t necessarily say that about eBay,” Icahn was heard saying.
In a television interview on Thursday when asked if he would keep Donahoe, Icahn said the jury was out, but then proceeded to hammer Donahoe’s handling of the Skype divestiture. He also asked why eBay’s stock price was up 70% in his three years as CEO while Amazon’s was up 450% and Visa’s was up 270%. “If you’re going to say Donahoe’s doing a great job, I would question that.”
Donahoe took to the eBay blog on Thursday to make a case for why he believed that the company, customers and shareholders are best served by keeping PayPal and eBay together, and he said the board was “unified in its view on this.” He also made his case on LinkedIn.
Donahoe talked about the risk of distractions. “Separation may seem like a compelling concept at first blush. But when you separate two highly intertwined and high-performing businesses, it creates significant distractions and dis-synergies. At a time when competition is increasing and innovation is accelerating, we can’t afford distractions. We believe that an unwavering focus on executing our strategies is the best way we will drive growth and create shareholder value.”
It’s hard to imagine employees aren’t distracted by Donahoe and Icahn’s messages and the prospect of a spin-off and what such a development would mean to them.
Here’s part of Donahoe’s letter to employees dealing with the proposed spin-off:
“We also announced today that the company has received a proposal from independent investor and shareholder Carl Icahn. He has nominated two of his employees to our Board of Directors and submitted a non-binding proposal for a spinoff of PayPal into a separate company.
“Our board and management team welcome the perspectives of all shareholders, and I spoke directly with Mr. Icahn to hear his views. We’re committed to enhancing the value of the company for all shareholders. His PayPal proposal is not a new idea. And our board regularly assesses all of our strategic options as a company. We will always do what we believe is best for our company, our shareholders and our customers.
“We believe strongly that PayPal and eBay are far more valuable together than apart. The synergies are clear. PayPal has succeeded because it is a part of eBay, not in spite of it. eBay accelerates PayPal’s success, providing tens of millions of customers who then help PayPal grow off-eBay. The closed loop global transaction data provided by eBay makes PayPal smarter, enhancing its world-class risk capabilities. And eBay funds PayPal’s growth. This enables PayPal to invest aggressively in mobile, credit and acquisitions such as Braintree.
“We know this and we will work hard in the coming weeks to ensure our shareholders understand this. Most important, we must not let Mr. Icahn’s proposals become a distraction for us. The best way we can create value is by executing our plans, delivering growth and serving our customers. Let’s stay focused and execute well every day. “
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