Meg Whitman bids farewell to eBay

After 10 years as one of the most high-profile CEOs in Silicon Valley, Meg Whitman will leave eBay on March 31. John Donahoe, who worked with Whitman at Bain in the 1980s, will take over as president and CEO.

After two years of a declining stock price and a slowdown in the growth of the auction business, it comes to no one’s suprise that Whitman, 51, is retiring. Wall Street analysts and industry insiders say Whitman’s departure has been expected for awhile. This March will mark Whitman’s 10-year anniversary at eBay (EBAY), and she has previously stated that a CEO should not stay longer than a decade.

“She’s done a phenomenal job leading the company up until now, but the business has matured. Buyers and sellers are looking for a change,” says Scott Devitt, an Internet consumer analyst with Stifel Nicolaus.

The auction powerhouse is under pressure to move quickly to make a major overhaul with growing competition from Amazon (AMZN). eBay will report its fourth-quarter earnings Wednesday, and Wall Street is expecting to hear how Donahoe’s new position and an anticipated drop in listings fees will jump start eBay’s auction business.

Donahoe, 47, joined eBay in April 2005 as president of eBay Marketplaces, one of the company’s most important businesses. At a UBS conference with investors last December, the former management consultant at Bain outlined key strategies to revive eBay’s marketplace – which has 248 million registered users – in 2008. Donahoe has said the company must focus on balancing both the needs of buyers and sellers. Historically, eBay has paid more attention to sellers, who pay fees to list their products on the site.

As eBay has become more corporate, Whitman’s philosophy has been to bring in executives from outside. In 2006, she recruited Bob Swan, a 15-year General Electric (GE) veteran as CFO. The year prior, she hired Donahoe, who did an 18-year stint at consulting firm Bain, to run eBay’s auction business. Last January, Donahoe led the successful acquisition of StubHub, the online ticket resale service that handled more than 5 million ticket sales in 2007.

The ultimate test, though, is whether Whitman’s successor can reverse eBay’s slowing marketplace, which accounts for 70 percent of the company’s revenues. Whitman, one of the most high-profile female CEOs, has been repeatedly criticized for not capitalizing on change quickly enough and for overpaying for the telephony service Skype. “Could eBay have been proactive before Amazon and Google came along? They could have,” Devitt says.

One problem that rankles eBay users is the fee charged to sell items online. Historically, eBay has increased listings fees at the start of every year. But with more eBay members turning to sites like Amazon or Google (GOOG) to sell their products, eBay is looking to lure its core users back. The company is expected to announce a lowering of the fees soon. “If there’s a negative here, it was in the speed of which they’ve improved on the site. A fee structure could have been executed two years ago rather than today,” Devitt says.

A prominent eBay members network – that the San Jose-based company closely monitors – says that its members listings dropped 14% in the fourth quarter from the previous year. “eBay’s marketplace isn’t set up to scale well for sellers. Whether you list one item or one million, it’s a flat price structure,” says Jonathan Garriss, the executive director of the Professional eBay Sellers Alliance. “As sellers build bigger businesses, it makes sense to have their own platform and participate in shopping engines like Google or sell on the Amazon platform.”