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[video] How Long Can eBay Try to Be the Next Amazon?

NEW YORK (TheStreet) - Billionaire activist investor Carl Icahn's proposal to split eBay's (EBAY) fast growing PayPal business from the company's online auction marketplace may boil down to one question: Can eBay still convince Wall Street it is the next Amazon (AMZN)?

For eBay management and shareholders that may be the hundred billion dollar elephant in the room. Currently, eBay carries a stock market capitalization of $71 billion while Amazon carries an over $183 billion market cap. 

After a series of what appear to be extremely well-timed acquisitions and a plan to invest heavily in its core online marketplace, eBay still appears to be running alongside Amazon in the world of online retail. It also has managed to keep some type of pace with Amazon, amid a shift in consumer spending habits that has crushed shares in big box retail outlets like Sears (SHLD), Best Buy (BBY) and even mighty Wal-Mart (WMT).

Maybe in the race for online retail riches, Amazon has been the hare and eBay has been the turtle? Still, eventually eBay shareholders are going to want to see signs that the company is gaining ground on its larger competitor.

We don't yet know the full extent of Icahn's proposals or even the size of his investment in eBay. However, it seems clear that his plan would rest on the idea that eBay is not succeeding and should begin to farm out the value of its component assets for the benefit of shareholders.

PayPal, which Keefe, Bruyette & Woods analysts value at between $25 billion and $46 billion depending on whether it is a part of eBay or split off as an independent company, is the crown jewel asset that Icahn has targeted. According to a disclosure made by eBay on Wednesday, he believes PayPal would be worth more if it were made independent.

EBay, for its part, said on Wednesday it has already taken an "in depth" look at a PayPal split and decided that the payments platform holds more value for shareholders within the wider company.

They don't currently appear willing to take up Icahn's proposal to split-off PayPal. EBay did say Icahn has made two appointments to the company's board of directors, which will be passed onto a nominating committee.

"eBay's Board of Directors has concluded that the company and its shareholders are best served by the current strategic direction of the company and does not believe that breaking up the company is the best way to maximize shareholder value," the company said on Wednesday.

There is a case to be made for eBay's management and its current board of directors.

After all, the company remains one of the most valuable online businesses in America. That comes amid titanic shifts in technology and consumer spending habits, and years of criticism that eBay's foundational auction marketplace is little more than a flea market.

The company has failed less quickly than many expected and has succeeded in ways few might have expected just five years ago.

PayPal, acquired in the aftermath of a late 1990's dot-com bust, has generated extremely high returns for eBay shareholders. The unit was acquired by eBay for $1.3 billion in stock and now would likely fetch a valuation of over $25 billion if it were split off, according to analyst estimates. Between a third and half of eBay's prospective market value is attributable to PayPal, which continues to grow at double digit rates as consumers adopt online and mobile payment platforms.

EBay has also been successful in using acquisitions to keep its online marketplace in lockstep with Amazon. The company's $2.4 billion acquisition of GSI Commerce in 2011 came just before many investors began to fully understand the scope of logistics and fulfillment infrastructure needed to succeed in online retail.

GSI Commerce has allowed eBay to create distribution hubs and relationships with a spectrum of retailers that mirrors Amazon. As with Amazon, the company has been able to quickly adapt its marketplace so that it appeals to shoppers using mobile devices.

The company has also expanded into markets that may be seen as increasingly valuable and where it may have a clear first mover advantage.

EBay's $310 million acquisition of ticket re-seller StubHub came just before a boom in the adoption of smartphone devices and a surge in consumer spending on mobile applications. Under eBay's ownership, StubHub has become the de-facto mobile application that sports and concert fans use to buy or sell a last minute ticket.

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