eBays Crossroads: Turn Around or Break Up

The thing about corporate turnarounds is that theyre supposed to turn a company around. As in 180 degrees. Theyre not supposed to stop halfway and let the company drift sideways. But something like that is happening to eBay: Its long, slow turnaround is, well, turning flat.

For the past couple of years, the online marketplace and payments company has been engineering a return to growth under the guidance of CEO John Donahoe, who took over from Meg Whitman in March of 2008. Donahoe embarked upon an aggressive and risky effort to transition eBay from an auction house for garage clutter to a marketplace centered on larger sellers and fixed-price goods like bulk inventory.

At first, the makeover seemed to hurt eBays growth. But last summer, after reporting second-quarter earnings, investors began to believe in the turnaround, sending the stock rallying. But since then eBays stock has stalled, rising just 0.3 percent, while the Nasdaq has gained 14.6 percent and shares of Amazon have surged 30.3 percent. Back in January, there were signs that the turnaround was in jeopardy, and further evidence implies that is in fact the case.

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