Today: As Chinese e-commerce giant Alibaba plans to generate millions in IPO, analyst suggests Google should acquire eBay to compete in changing, challenging online environment. Also: Wall Street bounces back from rough week.
The Lead: Is a Google-eBay merger the cure for what ails companies?
Google is struggling to keep up with rivals in the e-commerce and payments arenas. eBay is being openly and forcefully challenged to spin off its PayPal online-payments company while Chinese e-commerce giant Alibaba plans for a huge cash infusion on these shores.
One analyst's solution: A common front.
Baird Equity Research analyst Colin Sebastian wrote in a note Monday morning that an acquisition of eBay by Google represents "a possible 'best of both worlds' opportunity" that would provide eBay investors the extra value that Carl Icahn is seeking to unlock while boosting Google segments that are currently struggling.
"We believe acquiring eBay/PayPal would be one way for Google to secure quickly a strong leadership position in commerce and payments, and likewise, could represent a better strategic option than alternatives proposed for eBay," the analyst wrote Monday.
While eBay's tussle with Icahn has been very public, Sebastian focuses more on Google's ability to keep up in payments, where its Google Wallet mobile-payments solution has yet to catch on, and the burgeoning e-commerce industry, where the competition keeps getting tougher.
"Google is losing share in e-commerce search to Amazon, with more competition on the horizon from companies such as Alibaba, Pinterest and social networks Facebook, Twitter and potentially messaging apps," Sebastian wrote.
Alibaba announced Sunday that it would hold an initial public offering in the United States, which could bring the Chinese company a record-breaking cash haul for a technology company. Another Google competitor, Yahoo, stands to profit handsomely, as the Sunnyvale Internet giant owns 24 percent of the company even after selling half its stake for roughly $7.6 billion in 2012. Yahoo stock gained 4 percent to $39.11 Monday.
Alibaba joins fellow Chinese Web giant Sina, which operates Twitter rival Weibo, as upcoming IPOs on American shores that could "fuel direct competition with Google, Facebook and Twitter," Constellation Research analyst R. Ray Wang told Marketwatch.
"The big difference when we talk about Alibaba and Weibo is scale," Wang said Monday. "What we're talking about is Amazon proportions of scale driving massive amounts of engagement and, of course, revenue."
A Google acquisition of eBay would be "one of the most expensive ever consummated," Sebastian admits, with the San Jose company's market capitalization topping $70 billion. However, the analyst wrote that the deal would be a good one for Google even while paying a premium of up to 50 percent of eBay's going rate, which would push a purchase price higher than $100 billion.
The deal also would certainly face antitrust complaints, especially after Google's recent fight to avoid such charges in Europe due to promotion of its own services in search results.
Sebastian labeled his note "a thought exercise" in an interview with Bloomberg TV on Monday, but added that his investigation showed "Google has the resources and the strong engineering platform to be able to put eBay and PayPal on their platform successfully."
Google gained 1.7 percent to $526.74 Monday while its instant-messaging offering suffered its second major outage this year, and eBay rose 1.2 percent to $57.42 while explaining that Icahn isn't legally entitled to documents he is requesting.
SV150 market report: Stocks bounce back, Tesla keeps fighting
Wall Street rebounded from a poor showing last week with strong gains Monday, and Silicon Valley joined the charge with a 1 percent gain in the SV150 index of the area's largest tech companies.
Tesla Motors, which suffered somewhat after New Jersey banned its direct-sales approach last week, gained 1.3 percent to $233.98 Monday while fighting a similar tactic in Ohio. Tesla has two stores in Ohio currently and plans to expand there, but Ohio car dealers are fighting to get a bill into the state legislature that would prevent Tesla's expansion. "The bill would shut down our ability to grow in the Ohio market and, frankly, it's just a first step to them shutting down our existing businesses," Tesla vice president Diarmuid O'Connell told the Associated Press. Despite its challenges, the Palo Alto electric car manufacturer received an upgrade from Baird analyst Ben Kallo, who bumped his price target from $245 to $275.
Apple gained 0.4 percent to $526.74 as 9to5Mac reported about the Cupertino company's further goals in the health arena and ISI Group analyst Brian Marshall predicted the iPhone 6 could be "the mother lode of all upgrade cycles." Facebook increased 1.5 percent to $68.74 after striking its first partnership for the Menlo Park company's new Paper app; Argus Research analyst Joe Bonner cut his rating of the company, however, noting that the big-money acquisition of WhatsApp carries many risks. Twitter moved 0.3 percent higher to $52.05 as CEO Dick Costolo made his first visit to China on behalf of the company while the San Francisco social network reportedly tested a new type of timeline.
Up: VMware, Yahoo, Yelp, NetApp, Sandisk, Electronic Arts, Oracle, Google, Facebook, Adobe, Hewlett-Packard, Applied Materials, Tesla, eBay
Down: LinkedIn, Zynga, Advanced Micro Devices, Juniper, Pandora, Netflix, SolarCity
The SV150 index of Silicon Valley's largest tech companies: Up 15.29, or 1 percent, to 1,543.27
The tech-heavy Nasdaq composite index: Up 34.55, or 0.81 percent, to 4,279.95
The blue chip Dow Jones industrial average: Up 181.55, or 1.13 percent, to 16,247.22
And the widely watched Standard & Poor's 500 index: Up 17.7, or 0.96 percent, to 1,858.83
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.