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By Alistair Barr
SAN FRANCISCO (Reuters) - PayPal has opened a new data center to help the online payment division of eBay Inc handle its rapid growth, President David Marcus said on Tuesday.
The addition means PayPal now has four primary data centers, which it runs from network operation centers at its headquarters in San Jose, California, and Scottsdale, Arizona.
"We're growing still very, very fast, so we need more machines, more capacity and bandwidth," Marcus told Reuters in an interview.
Marcus declined to say where the new data center was located for security reasons. However, he said it has new technology that integrates well with some of PayPal's new initiatives.
PayPal is still growing online, but the company is also trying to become a common way of paying in physical stores, a much larger market than e-commerce.
The company expects to be in 2 million merchant locations by the end of 2013 and it is working on ways to persuade consumers to use PayPal with their smartphones, rather than their usual credit and debit cards.
Firing up a new data center "is a big sign of optimism," said Gil Luria, an analyst at Wedbush Securities. "PayPal could stretch their existing IT capacity or rent extra capacity, but they have the confidence to build a whole new data center."
In late March, Marcus told investors that PayPal can double the size of its business in the next three years.
Adding a fourth data center means PayPal is essentially increasing its IT capacity by a third, to support a potential doubling of its business. That suggests that the company is getting more "scale" as it grows, Luria said.
Data centers are often built to handle peaks in activity. As PayPal grows in different parts of the world, it is likely experiencing different peaks because users are paying with PayPal at different times, Luria explained.
"A single new data center can support several times as much activity because the peaks are spread out at different points in time and not as pronounced," Luria said.
(Reporting by Alistair Barr; Editing by Phil Berlowitz)