Salomon Smith Barney downgraded PayPal (PYPL

) to outperform from buy.

Analyst Patrick Burton says his downgrade will coincide with Salomon's eBay rating. He also notes that PayPal's price should now be tied to the performance of eBay given the structure of deal. Burton says Salomon's $75 target for eBay would equate to $29.25 for PayPal; as such, he cut PayPal's $33 target to $29 to reflect a tie to eBay's valuation.

He notes management expects the deal to close by the end of 2002. Strategically, the deal should improve fraud prevention, enhance growth, promote brand awareness and create cost synergies.