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PayPal outage frustrates merchants, consumers

PayPal suffered periodic breakdowns that crimped Internet sales for more than four hours Monday.
/ Source: news services

PayPal suffered periodic breakdowns that crimped Internet sales for more than four hours Monday.

The main outage occurred from 1:30 p.m. EDT through 2:30 p.m. when PayPal was unable to process any transactions worldwide, according to company spokesman Anuj Nayar.

The online payment service continued to experience scattered problems until about 6:10 p.m EDT. A bad piece of hardware caused the trouble, according to PayPal's blog.

PayPal is looking into whether merchants should be reimbursed for any lost sales during the outage, Nayar said. The payment service is owned by San Jose, Calif.-based eBay Inc., one of the Internet's main shopping centers.

PayPal and another eBay payment service, Bill Me Later, handled $16.7 billion in sales during the second quarter.

PayPal, which accounts for roughly a third of eBay's sales but a smaller proportion of profits, has about 75 million active users and is the world's largest Internet-based payment system. It handles $2,000 a second in online transactions, eBay spokesman Anuj Nayar said.

Analysts discounted a huge financial blow for eBay from Monday's incident.

"I wouldn't expect it to be a large monetary loss for them. Overall, PayPal is a relatively small part of eBay's profitability," Kaufman Bros. analyst Aaron Kessler said.

PayPal accounted for about 16 percent of eBay's profit in the second quarter, he added.

"An occasional server shutdown happens to a lot of companies. Obviously, you don't want to have it happen more than a couple of times a year or you do start to have brand or reputation concerns. But we've seen issues with Google Inc., Netflix Inc., and Inc. over the last couple of years, so I don't think an isolated incident is a huge deal for these companies."

This report contains information from The Associated Press and Reuters.