Alibaba Would Gain A 'Legitimate Foothold' Into America With eBay Purchase

Alibaba Group Holding Ltd BABA is rumored to be interested in acquiring eBay Inc EBAY. The unlikely rumor might sound crazy, but analysts don't think it's that bad of an idea. "It would give [Alibaba] a legitimate foothold into the American market," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. Cody Willard, chairman of Scutify (a financial social network), said that as big as Alibaba has become, "Nobody in the United States has used it." "Nobody in the western developed world has actually used Alibaba," Willard told Benzinga. On the flipside, he said that as many as 50 percent of that population has at least visited eBay.com. "I don't think [the buyout rumor is] that ridiculous," Willard continued. "Talk about leadership. That would take some serious leadership guts to do. We've seen crazier deals done. Remember AOL Time Warner?"

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eBay Minus PayPal

Analysts assume that if Alibaba acquires eBay, it will do so without PayPal, which is set to be spun off as a separate company this year. "There's no way they'd buy PayPal," said Udall. "So maybe they'd buy the non-PayPal assets of eBay, which would be at a much lower cost." Udall said that activist investors like Carl Icahn would prevent an eBay/PayPal packaged deal from being sold at a low price. "They'd gladly let eBay get bought," he said, noting that investors occasionally misinterpret these things. He believes that Alibaba may simply want eBay and have no interest in PayPal.

Damaged Reputation?

Would eBay's reputation be harmed by Alibaba? Udall thinks that it would "to a certain degree." But as long as Alibaba upholds the quality of the site, it shouldn't be a problem. "If you ask me personally, I wouldn't use eBay anymore because I definitely don't trust Alibaba," Udall added. "But I have an open mind. If I knew of five or six friends that had a [positive experience], then I'd use eBay again." Udall then joked that it is "pretty easy for me to say I wouldn't use eBay because I'm not using them right now." "I think core eBay usage has declined quite a bit," he concluded. Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.