Several firms are commenting on eBay (NASDAQ:EBAY) after reports the co is taking a 49% stake in a partnership with Chinese online portal and wireless operator Tom Online Inc. (Tom would hold a 51% stake):
- Prudential notes that in their view this news is like chop suey: good news mixed with bad. The
good news is that eBay would significantly reduce its operating losses in China. In addition, the combined company would be a stronger competitor. But the bad news is that eBay effectively would admit defeat in a market that was, at one time, billed as its next great growth opportunity.
The new Tom/eBay Chinese Web site will reportedly launch sometime in 2007. EBay is expected to maintain its own "cross-border" trading site for Chinese users that are selling to buyers outside of China, but it will shutter its main auction site in China.
Accdg to reports, the companies have not decided which brand name to use for the site. Tom CEO Wang Lei Lei will be CEO of the joint venture, and Jeff Liao, CEO of eBay's China subsidiary, will hold an unspecified management role at the joint venture and will also continue to run eBay's cross-border trading site. EBay is expected to contribute $40mm to the venture initially, and Tom will contribute $20mm.
Maintains Overweight rating and $40 price target on EBAY.
- Bear Stearns notes that while not stated in the article, they believe that eBay could simultaneously enter into a transaction involving PayPal and a local payments provider. Firm believes that a second transaction of this nature would be prudent and could likely add strength to the new platform, if true.
If this transaction were to happen, the firm would view it as a positive for the following reasons: 1) eBay will continue to participate in the upside growth of China, a market exhibiting one of the fastest Internet growth rates; 2) eBay will have access to a strong local company; 3) it will
cut of a funding source for eBay and likely lead to improved margins; and 4) potential synergies between Skype and PayPal.
Maintains Outperform.
Notablecalls: Not actionable but good to know category. Note that there are several firms out on EBAY this AM previewing the qtr (Jan 17) with GSCO telling investors to buy ahead of the release.
- Prudential notes that in their view this news is like chop suey: good news mixed with bad. The
good news is that eBay would significantly reduce its operating losses in China. In addition, the combined company would be a stronger competitor. But the bad news is that eBay effectively would admit defeat in a market that was, at one time, billed as its next great growth opportunity.
The new Tom/eBay Chinese Web site will reportedly launch sometime in 2007. EBay is expected to maintain its own "cross-border" trading site for Chinese users that are selling to buyers outside of China, but it will shutter its main auction site in China.
Accdg to reports, the companies have not decided which brand name to use for the site. Tom CEO Wang Lei Lei will be CEO of the joint venture, and Jeff Liao, CEO of eBay's China subsidiary, will hold an unspecified management role at the joint venture and will also continue to run eBay's cross-border trading site. EBay is expected to contribute $40mm to the venture initially, and Tom will contribute $20mm.
Maintains Overweight rating and $40 price target on EBAY.
- Bear Stearns notes that while not stated in the article, they believe that eBay could simultaneously enter into a transaction involving PayPal and a local payments provider. Firm believes that a second transaction of this nature would be prudent and could likely add strength to the new platform, if true.
If this transaction were to happen, the firm would view it as a positive for the following reasons: 1) eBay will continue to participate in the upside growth of China, a market exhibiting one of the fastest Internet growth rates; 2) eBay will have access to a strong local company; 3) it will
cut of a funding source for eBay and likely lead to improved margins; and 4) potential synergies between Skype and PayPal.
Maintains Outperform.
Notablecalls: Not actionable but good to know category. Note that there are several firms out on EBAY this AM previewing the qtr (Jan 17) with GSCO telling investors to buy ahead of the release.
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