The announced moves are intended to give each business the ability to consider all their alternatives, including a sale, eBay Chief Executive Officer John Donahoe said.
"No one knows what's going happen down the road," Donahoe said in an interview on Wednesday, after eBay reported fourth-quarter earnings. "But each business will have the flexibility they need to do what they need to do to win."
The moves come as Wall Street analysts question how long eBay and PayPal can withstand growing competition from online rivals such as Amazon.com, Google, and Alibaba Group, as well as retailers such as Wal-Mart Stores which are investing in their own e-commerce and payments platforms.
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As part of the moves announced on Wednesday, eBay agreed to adopt a number of corporate governance changes championed by activist investor Carl Icahn that would limit PayPal board's ability to prevent a takeover once it splits from eBay.
Any investor who owns 20 percent of PayPal will be able to call special meetings of shareholders, Icahn said in a separate statement that coincided with eBay's release. EBay also outlined plans to cut 7 percent of its workforce, or 2,400 positions, in the current quarter.
"I don't think that is the primary goal, but in general these moves could make for a cleaner, or more attractive, merger or acquisition," said Baird analyst Colin Sebastian, who has previously said Google could be a suitor for eBay.