SAN JOSE, Calif. — Online auction giant eBay Inc. announced today it is buying electronic payment facilitator PayPal Inc. for more than $1.3 billion in stock, in a long-rumored deal that the companies hope will make Internet trading faster, easier and safer.
The deal could hurt the Internet gambling industry, as eBay will end PayPal’s practice of handling gambling transactions. Although it is widespread, Internet gambling is considered to be illegal under U.S. law.
Separately, eBay released second-quarter earnings early, posting a net profit that more than doubled from last year. EBay earned $54.3 million, or 19 cents per share, on revenue of $266 million in the quarter ended June 30. That beat Wall Street forecasts of 17 cents a share, according to Thomson Financial/First Call.
Mountain View-based PayPal lets buyers and sellers exchange money via e-mail. Buyers make payments online through credit cards and bank accounts, and PayPal relays the funds to sellers’ accounts, taking a fee based on the amount transferred. About 60 percent of its business comes from eBay users.
Like eBay, it is a rare Internet-based business success. After beginning with just 24 experimental users in October 1999, PayPal has become profitable and boasts more than 15.4 million accounts. The company says it facilitated about $1.6 billion in money transfers in the most recent quarter.
Although regulators in some states have questioned whether PayPal might need to be licensed as a bank — a potentially worrisome prospect for PayPal’s growth — the company had one of this year’s best initial public offerings, with its stock rising 55 percent on its first day of trading in February and still well ahead of its $13 opening price.
In early trading today, eBay shares were down $2.28, nearly 4 percent, at $58.30 on the Nasdaq Stock Market. PayPal stock …