EBay Inc. (EBAY) executives said Wednesday they aim to remake the struggling Internet giant and accelerate growth by harnessing the potential of its PayPal online payments unit and focusing on the "secondary" e-commerce market.

Chief Financial Officer Bob Swan told analysts the company expects to generate total revenue of $10 billion to $12 billion in 2011, an increase of as much as 41% over eBay's $8.5 billion in revenue last year.

Speaking at eBay's Analyst Day meeting in San Jose, Calif., Swan said eBay expected non-GAAP earnings to grow by mid-single digits through 2011. Swan noted that the forecasts were contingent on the market returning to some sense of normalcy over the next few years.

Swan added that the company was targeting cost savings of $2 billion over the next three years by simplifying the organization, reducing processing costs and improving the customer experience in order to reduce support costs.

EBay has been under extreme pressure to convince investors that it has a plan to weather the deepening recession and compete against fixed-price retailers such as market leader Amazon.com (AMZN).

Donahoe acknowledged that eBay had been slow to adapt to the shifting e-commerce landscape, but he vowed to step up the pace of change at the lumbering giant.

"I will be ruthlessly objective to how I run the company," he said during his first Analyst Day since he became CEO last year.

Donahoe said the company's marketplaces unit would focus on the global "secondary market" in which partners would sell liquidated and discontinued products. He also declared that PayPal was becoming a second core business for the company.

Scott Thompson, PayPal president, later said the company's payments unit expects to double the size of its business over the next few years, processing $100 billion to $120 billion worth of transactions by 2011.

"We expect to process 14% of global e-commerce transactions by 2011," he told analysts.

Thompson said PayPal would achieve that growth by expanding its penetration on eBay, increasing its share of non-eBay transactions and by expanding into adjacent markets.

Thompson predicted that PayPal could generate $4 billion to $5 billion in revenue by 2011, although margins were expected to be squeezed over the next two years as the company works to integrate Bill Me Later.

EBay's payments business, which represents about 28% of the company's total revenue, grew 25% in 2008 to $2.4 billion.

Lorrie Norrington, president of eBay's marketplace unit, said the company sees a growing opportunity in becoming a platform on which to sell "secondary" products, almost all of which are currently sold offline through inefficient supply chains. She said the "secondary" market represents a $500 billion opportunity for eBay.

Asked whether eBay was ceding the online retail market to Amazon.com, Donahoe said: "We're going to focus on where we can win."

But company executives could only provide a few examples of retailers or liquidators that might be interested in using eBay as a platform to sell discontinued, open boxed or refurbished products. They noted that online merchant Buy.com recently started listing its products on eBay.com.

"The sweet spot will be as much with intermediaries as with retailers," Donahoe said in an interview.

Gene Munster, analyst at Piper Jaffray, said he was encouraged to hear steps eBay aims to take to improve its marketplace, but noted the company must follow through in executing on its plan. He added that he was concerned about eBay's reluctance to name partners for its secondary market" strategy.

"It's still a big unknown," Munster said.

Donahoe predicted that eBay's marketplace revenue would grow more slowly than the e-commerce market in 2009, track market growth in 2010 and surpass market growth in 2011. The company expects changes to eBay's marketplaces unit to drive revenues to $5 billion to $7 billion by 2011.

Asked about whether eBay might sell Skype, Donahoe reiterated that he sees no significant synergies between the Internet telephony unit and the rest of the company's portfolio. But he also noted that Skype remains a great stand-alone business that is not a distraction to the rest of the company.

EBay said Skype was expected to generate $1 billion in revenues in 2011.

-By Scott Morrison, Dow Jones Newswires; 415-765-6118; scott.morrison@dowjones.com