eBay reports it had a strong holiday season, with its fourth quarter profits up 53 percent.
Whitman, 51, had been reported to be plotting the move and handing the job to John Donahoe, 47, who has been heading eBay's core auction and e-commerce businesses. She confirmed her March 31 departure as eBay reported fourth-quarter earnings Wednesday.
Whitman will remain on eBay's board of directors.
"With humor, smarts and unflappable determination, Meg took a small, barely known online auction site and helped it become an integral part of our lives," Pierre Omidyar, eBay's founder and chairman, said in a statement. "We're all enormously grateful that Meg dedicated herself to stewarding eBay through its 10 most formative years."
Whitman reminded analysts in a conference call that she has often said that 10 years is about as long as any CEO should serve. She said coming to eBay was a "remarkable opportunity" that has "exceeded all my expectations." The experience also has made Whitman, eBay's third-largest individual shareholder, a billionaire.
"It's time for eBay to have new leadership, a new perspective and a new vision," she said. "It's tough to stay fresh after ten years, no matter who you are."
EBay shares rose $1.81, 6.7 percent, to close at $28.94 in advance of the earnings report and before Whitman's announcement. In extended trading, the stock initially rose but then retreated to $27.55.
The announcement of Whitman's departure came as eBay reported a 53 percent gain in fourth-quarter profits due to a strong holiday season. It beat Wall Street's expectations, though its future guidance was tepid.
The San Jose-based company said that in the last three months of 2007, it earned $530.9 million, or 39 cents per share. In the same period a year earlier, eBay earned $346.5 million, 25 cents per share.
Revenue in the quarter rose 27 percent to $2.18 billion.
Excluding stock-option expenses and other charges, eBay said it would have earned $611 million, or 45 cents per share.
By that measure, analysts surveyed by Thomson Financial had been expecting eBay to earn 41 cents per share. EBay also exceeded Wall Street's revenue projection of $2.14 billion.
Whitman said she was pleased with the results, which ended "a remarkably strong year."
Most of eBay's years have been that way since Whitman took over in 1998, when the auction site was still crippled by server outages and mainly home to hobbyists selling collectibles like Beanie Babies. Before long, though, it rose to become an incredibly diverse shopping zone, with nearly $60 billion worth of merchandise trading hands last year.
Donahoe pledged to upgrade the site and to revamp its fee structure. Though details are to come later, he indicated that eBay would lower the fees that people pay to list something for sale but raise eBay's commission on successful sales.
That's a move analyst Derek Brown of Cantor Fitzgerald said will be eBay's "wild card" going forward, placing pressure on the site to turn any increase in listings into actual sales transactions.
"(The fee structure change) in itself has the potential to change the face of eBay," Brown said.
Donahoe plans on upgrading the site's search function so that if there is an influx of listings, users can still easily find what they are looking for.
Brown said Donahoe's openness about some of eBay's problems is encouraging, but "it feels as if they are pulling a lot of levers at once and that can create its own challenges."
The earnings report highlights that Donahoe - who came to eBay in 2005 from Bain & Co., the consulting firm where he had previously worked with Whitman - takes over a company that remains very profitable, but is finding it hard to keep growing.
In the fourth quarter, the company made little progress on its count of active users, people who have bought or listed an item for sale in the past year. Active users rose 2 percent to 83.2 million.
The number of items listed on eBay's various sites rose 4 percent, reversing two straight quarters of declines.
And eBay's guidance for 2008 may disappoint some investors. The company expects earnings after charges to be 37 to 39 cents per share in the current first quarter. Analysts had been forecasting 40 cents per share.
EBay's projection for the full year - $1.63 to $1.67 per share - was in line with analysts' existing forecast of $1.66.
Donahoe pledged to aggressively change eBay's shopping sites to make them "easier and safer to use."
"While we've made strides in these areas, I am clear that we need to do much more," Donahoe said on the conference call. "I truly believe that eBay's best days lay ahead."
For all of 2007, eBay earned $348 million, 25 cents per share, on revenue of $7.67 billion. That included a $1.4 billion write-down in October to account for the disappointing performance of Skype, the online telephone service eBay bought in 2005. In 2006 eBay's profit was $1.13 billion, 79 cents per share, on revenue of $5.97 billion.
EBay further reshuffled the executive ranks Wednesday by disclosing that Rajiv Dutta, its former chief financial officer and current head of its PayPal unit, is being named executive vice president, reporting to Donahoe. Dutta will also join eBay's board of directors.
Scott Thompson, PayPal's current chief technology officer, will take over as head of the division. EBay also said longtime executive Bill Cobb will retire at the end of the year.
The Associated Press contributed to this report