Carl C. Icahn's battle against eBay has drawn a number of boldface names into the fray. The latest entrant happens to be one of the most prominent executives in Silicon Valley at the moment: the LinkedIn co-founder Reid Hoffman.
In an online post on — where else? — LinkedIn, Mr. Hoffman criticized his fellow billionaire for waging a battle based on short-term thinking. Spinning out PayPal from eBay or selling it outright might generate a quicker return for shareholders, he argued, but it might inhibit the payments processor from reaching its full potential.
The LinkedIn co-founder draws a distinction between Wall Street and Silicon Valley, arguing that the tech sector is focused on long-term growth, sometimes at the expense of shorter-term returns for shareholders.
Mr. Hoffman also defended the original takeover of PayPal by eBay, a deal he helped engineer as a senior vice president at the payments company. Under the aegis of eBay, PayPal has become an integral part of its corporate parent, benefiting from higher profit margins in transactions tied to the online marketplace and gaining capital to invest in nascent operations like mobile and real-world payments.
From Mr. Hoffman's post:
While PayPal is no longer a startup, it still has massive growth prospects. But to someone who isn't investing in the long term, it's just a cash cow that's ready to be slaughtered.
That's why Carl Icahn is churning out letters to shareholders so fast he actually rechristened ex-PayPal COO and Yammer founder David Sacks as "David Yammer" in his first missive. It's hard to imagine he could have a coherent long-term plan given that his due diligence doesn't extend to surnames. (It's since been corrected.)
Icahn is determined to manufacture consent for a spin-off, then a sale, so he can make a quick profit on that PayPal premium.
If you believe that it takes more than a few caustic letters to shareholders and a quick trade to deliver compounding returns to investors over time, Icahn's argument loses much of its zing.
—By Michael de la Merced of The New York Times