Ebay Inc will buy payment gateway Braintree for about $800 million to strengthen its PayPal unit’s presence on mobile devices and take out a rapidly growing rival.<\/p>\n
PayPal, the dominant online provider of payment services, has been trying to fend off a clutch of fast-rising competitors such as Braintree, Intuit Inc’s GoPayment and Twitter founder Jack Dorsey’s Square Inc.<\/p>\n
The deal gives Ebay access to Braintree’s Venmo, an app that lets consumers make payments on smartphones and tablets, an area in which EBay wants to be more involved.<\/p>\n
“We believe that this deal makes reasonable sense strategically as it expands PayPal’s distribution and removes a competitor,” RBC Capital Markets analyst Mark Mahaney said.<\/p>\n
Shares of EBay, 40 percent of whose revenue last year came from PayPal, rose as much as 4.4 percent on the Nasdaq on Thursday.<\/p>\n
PayPal, with its 120 million users, has dominated online payment services for about a decade. But its growth has moderated in recent years, partly as a result of increased competition on mobile devices from smaller but nimbler rivals.<\/p>\n
Hill Ferguson, EBay’s vice president of global product, did not rule out more acquisitions to boost PayPal’s mobile presence. “Anything’s possible,” he said in an interview.<\/p>\n
PayPal bought mobile app developer Duff Research in March to add to its technology expertise.<\/p>\n
The company has also been expanding into the much larger offline market, working on ways to convince customers to pay through PayPal accounts instead of credit cards or debit cards.<\/p>\n
Research firm IDC had last year forecast that worldwide purchases over mobile devices would exceed $1 trillion by 2017. (http:\/\/link.reuters.com\/heq43v)<\/p>\n
The volume was about $163 billion in 2012, Gartner said.<\/p>\n
Braintree, whose clients include online hotel booking service Airbnb and online restaurant booking service OpenTable Inc, expects to process about $12 billion in payment volume this year.<\/p>\n
“It was rapidly becoming a potential threat to PayPal,” Benchmark Co analyst Daniel Kurnos told Reuters.<\/p>\n
Braintree, backed by venture capital firm Accel Partners among others, provides merchant accounts, payment gateway, billing and credit card storage.<\/p>\n
Chief Executive Bill Ready Will lead Braintree, with more than 180 employees, as a separate service within PayPal.<\/p>\n
EBay said the deal, expected to close late in the fourth quarter, will have a negative impact of 1 cent per share on its 2013 adjusted earnings.<\/p>\n
The company’s shares, which have risen about 5 percent in the last three months, were up 4.2 percent at $56.50 on Thursday afternoon.<\/p>\n
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