Carl Icahn and Elon Musk Are Wrong: Here's Why eBay Keeping PayPal Makes Sense

It's quite refreshing that all the hullabaloo about separating PayPal from its parent company, eBay ,has finally ended. Activist investors Carl Icahn and Elon Musk tried hard to get eBay to divest its high-growth unit, arguing that an independent PayPal would be more valuable than its current $40 billion valuation. Musk went on to say that PayPal would ''simply be cut to pieces'' by rivals such as Amazon Payments, Google Wallet, or even Apple's  upcoming mobile payment platform if it remains a part of eBay.

On the surface, it appears as if eBay has been piggybacking on PayPal's success. PayPal's $6.6 billion revenue in 2013 is equivalent to 41% of eBay's overall revenue, and 36% of its profit. eBay's top-line growth of 20% in fiscal 2013 was 1.5 times better than its overall growth of 14%, and 1.8 times higher than the 11.1% growth of its other business segments. Additionally, 30% of PayPal's $180 billion in online transactions in 2013 took place on the eBay website.

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