eBay is splitting off its fastest-growing segment, PayPal, the e-commerce company said today. Investors applauded the news, sending eBay's shares up nearly 7% in morning trading. The move comes after months of pressure from activist investor and billionaire Carl Icahn. eBay CEO John Donahoe had been adamant that splitting off PayPal was the wrong move for the company. But today, the company said that making the mobile payment service a separate publicly traded company next year "maximizes strategic focus and flexibility for eBay." Donahoe also said he will step down as CEO of eBay after overseeing the separation of the two companies and will not have a management role in either of the two afterward. He may have a seat on the board at one or both, along with eBay Chief Financial Officer Bob Swan.
Dan Schulman, an executive at American Express, will be the new president at PayPal, effective immediately. The 56-year-old will become PayPal's CEO once the separation takes place. Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay Inc. He will lead the eBay Marketplaces and eBay Enterprise businesses. Cowen and Co. analyst John Blackledge said the spinoff "makes a great deal of sense," because there is "manageable overlap" between the two businesses and the new structure makes PayPal, which was acquired by eBay in 2002, "more nimble" to respond to challenges like Apple's new mobile payment system. (Read more eBay stories.)