This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Could PayPal Become the Next VMware?

NEW YORK (TheStreet) -- If eBay (EBAY) sold off 20% of its PayPal stake to the public it could turn the payment services company into one of the hottest stocks on Wall Street.

Activist investor Carl Icahn Wednesday called for eBay to do just that, in contrast to his request in January for the company to spin off the entire holding.

Although eBay rejected Icahn's call, it remains an interesting idea.

Icahn's latest message to eBay shareholders says that if eBay sells a small portion of its PayPal holding, then PayPal can retain the benefits of being a stand-alone stock while also maintaining the efficiencies of being a part of its parent.

A partial separation of a hot subsidiary company is not a new idea. Back in 2007, EMC (EMC) spun off 15% of VMware (VMW). VMware has since multiplied in value more than 100 times what EMC originally paid to acquire it.

VMware makes software that allows a computer to run different operating systems, or several versions of the same operating system simultaneously, enabling corporations to improve the efficiency of the computers in their data centers and reduce spending on hardware, electricity and maintenance over time.

Many investors believed that the true value of VMware was lost when it was part of EMC because of the stock market's tendency to undervalue the stocks of conglomerate businesses.

VMware doubled in price the first few months after the initial public offering, but suffered the same downturn in share price as other U.S. companies during the 2008 financial crisis.

Since the downturn, however, the stock has risen to a market cap of $47 billion, making it worth more than 100 times the $365 million that EMC originally paid to acquire it in 2004.

If eBay follows the path of EMC and spins off a small portion of PayPal, it could generate substantial cash to help improve other areas of its core business.

EMC used its VMware payout to expand its workforce and improve salaries, while Icahn stated that the proceeds of the PayPal sale would give the company much-needed cash that could possibly fund future acquisitions.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,880.36 -31.75 -0.19%
S&P 500 1,970.07 +0.12 0.01%
NASDAQ 4,462.9020 +20.2040 0.45%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs