The Wall Street Journal-20080122-EBay Chief Whitman- Web Pioneer- Plans to Retire- Decade in the Top Job- Auction Head Donahoe In Lead to Be Next CEO
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EBay Chief Whitman, Web Pioneer, Plans to Retire; Decade in the Top Job; Auction Head Donahoe In Lead to Be Next CEO
EBay Inc. Chief Executive Meg Whitman is preparing to retire.
In the past few months, Ms. Whitman, who has led the San Jose, Calif., Internet auctioneer since March 1998, has been delegating more daily responsibilities to her lieutenants and is completing her succession planning, say people familiar with the matter. A decision about her departure could come within weeks, though the situation remains fluid, say these people.
John Donahoe, 47 years old, whom Ms. Whitman recruited in 2005 to become the president of eBay's auction business unit, has emerged as the leading candidate to succeed her, added these people. EBay is to report fourth-quarter earnings tomorrow.
EBay spokesman Hani Durzy declined to comment.
The departure of Ms. Whitman, 51, would mean the loss of one of Silicon Valley's highest-profile CEOs. Few executives who helped pioneer the commercialization of the Internet industry have remained on top for as long, except for some who can also claim founder titles, such as Amazon.com Inc. CEO Jeff Bezos and Yahoo Inc. CEO Jerry Yang.
Ms. Whitman's retirement would come at a critical point for eBay. The company's auction business, which allows individuals to buy and sell items online to the highest bidder or at a fixed price, accounts for more than two-thirds of eBay's nearly $6 billion in annual revenue but has experienced slowing growth rates for the past few years. Any efforts to reverse the slowdown could involve drastic changes that may be more palatable under a new CEO. EBay has already warned Wall Street in recent months that it may alter how it structures its fees for listing and selling items by collecting bigger fees once sales close.
Mr. Donahoe has been wrestling with how to reverse the auction business's declining momentum. Last year, he set into motion changes such as simplifying the auction Web site.
The auction business remains stagnant by some measures. EBay's third-quarter listings of auction items for sale, a key barometer of the auction unit's health, fell 3%.
The timing of Ms. Whitman's retirement is of her own choosing, say people familiar with the situation. Not long after she joined eBay, Ms. Whitman declared that no CEO should stay more than a decade in the same job because people need new challenges and organizations need fresh perspectives. While she has backed away from that comment in recent years, Ms. Whitman now appears to be making good on that early pledge as she approaches her 10-year anniversary as eBay CEO this March.
Under Ms. Whitman, eBay has become one of the Internet's most successful businesses by pioneering a way for strangers to trade with each other online. She led the company through its September 1998 initial public offering, and eBay has since delivered more than 40 consecutive quarters of sequential revenue growth. Profit has increased every year and the company now has 248 million registered users globally and 15,000 employees. Its $5.97 billion in revenue last year marked a big jump from revenue of $86 million in 1998.
EBay's stock has risen from $1.97 a share adjusted for splits and other changes on its first trading day to stand Friday at 4 p.m. in Nasdaq Stock Market composite at $28.33, up 21 cents. In late 2004, shares traded at more than $50 a share on an adjusted basis.
Ms. Whitman joined eBay in 1998 after stints at Hasbro Inc., Florists Transworld Delivery and Stride Rite Corp. At the time, the commercial Internet was just taking off. Consumers were discovering the Web. Founded in 1995 by entrepreneur Pierre Omidyar, eBay was a funky start-up that allowed individuals to sell collectibles, Beanie Babies and other items to the highest bidder in a virtual flea market. When Ms. Whitman joined, it employed 30 people.
EBay flourished for much of this decade as more households connected to the Internet. But concerns have mounted in the past few years as the company's revenue growth rate has slowed from triple-digit figures to about 30% a year. Last year its net income rose 4% to $1.13 billion.
To maintain momentum, eBay snapped up Web auction sites in India, China and elsewhere. It developed new offerings like classified listings. It also acquired other businesses such as online ticketing and Internet calling.
There were missteps: Last year, eBay took a $1.4 billion write-down for its purchase of Internet calling company Skype. And threats loom, such as Amazon's growing recruitment of many of eBay's top merchants. Some consumers say they no longer have the fascination for online auctions.
Nonetheless, eBay remains one of the Web's top destinations. Its success has made Ms. Whitman a billionaire, with her net worth recently estimated by Forbes at $1.4 billion.
Ms. Whitman has long planned for her eventual exit, say people familiar with the matter. She often rotated eBay executives into different operational roles as a way to groom potential successors and to give the board a slate of candidates from which to choose. One of her management tactics included issuing high-level directives, such as "globalize services," and then giving executives leeway to work out the details as a means of proving themselves, these people say.
In February 2005, Ms. Whitman recruited Mr. Donahoe to become president of eBay's auction-business unit, a newly created position. At the time, Mr. Donahoe was world-wide managing director of consulting firm Bain & Co. Ms. Whitman knew Mr. Donahoe from when the two had worked together at Bain years before.
In his departing email to friends and Bain colleagues, Mr. Donahoe wrote, "Meg Whitman was my 'first boss' at Bain and I am delighted to be working with her once again. I look forward to getting to know eBay's community, people and business."
A month later (March 2005), Ms. Whitman came close to leaving eBay when Walt Disney Co.'s board interviewed her to succeed then-CEO Michael Eisner. But she quickly withdrew her name from the running because she suspected the board was already set on then-Disney President Robert Iger, who later became Disney CEO. Ms. Whitman then publicly recommitted herself to eBay, though some employees and analysts often wondered for how long.
Meanwhile, Mr. Donahoe's role at eBay positioned him as a contender for the top job. He was put in charge of the auction business, the biggest and oldest part of the company. He also was ranked above two other veteran eBay executives, Bill Cobb and Matt Bannick, who had been considered possible successors. Mr. Donahoe reported directly to Ms. Whitman.
Ms. Whitman charged Mr. Donahoe with leading important company initiatives. He supervised internal discussions two years ago about how eBay should deal with the growing threat of Web-search giant Google Inc.
Jack Sheng, a top consumer-electronics seller on eBay, says Mr. Donahoe, a former Dartmouth College basketball player, is dogged about trying to understand sellers' problems. When Mr. Sheng met him in 2006, Mr. Donahoe grilled him incessantly, albeit politely, during a dinner for top eBay sellers. "He's a very concerned leader who cares about the details of what's going on at eBay," Mr. Sheng says.
