I have a theory about eBay. Everything was going great for the company until that grilled-cheese sandwich came along.

In November 2004, eBay’s stock was trading near an all-time high at $56 a share, having risen sixfold in a little less than four years. Then an Internet casino paid $28,000 for the sandwich — supposedly with an image of the Virgin Mary on it — and within a month the stock and the company began a slow, irreversible decline. This month, shares were trading below $10. eBay needs a fix, but there aren’t a lot of easy options before it.

For their part, eBay executives recently spent several hours telling analysts how things would be different. CEO John Donahoe was forthright with the audience, admitting the company had fallen short of expectations and that this was “unacceptable.” He got a little defensive on Skype, saying he’s tired of apologizing for that deal. At times, he sounded like the Zen detective on NBC’s Life: “The eBay you knew is not the eBay of today or the eBay of the future.”

That means its time for another makeover for eBay — or at least for the e-commerce business that has always been the heart of the company.  Over the past few years, eBay tinkered with its robust auction bazaar to focus it more on an Amazon.com-ish fixed-price model and on its top sellers. The result was slower revenues and legions of angry, smaller sellers. Now, eBay is favoring an Overstock.com-ish focus on excess inventory. eBay’s supply chain won’t rely on home attics anymore, but instead on corporate warehouses.

Will it help? It’s almost certain to further alienate small sellers, although eBay seems content to cut them loose — the new, improved eBay is geared toward even bigger sellers. But I can’t help but wonder whether the company also knows it’s simply fading as beacon of e-commerce. eBay says its 2011 revenue from its marketplace business would be between $5 billion and $7 billion. That’s compared to $5.6 billion in 2008, so over three years, revenue could rise as much as 25 percent. Or it could fall as much as 11 percent.

Now compare that to PayPal. eBay’s payments division (dominated by PayPal) saw $2.4 billion in revenue last year. By 2011, the company expects revenue to be between $4 billion and $5 billion. Think about that for a second: In a couple of years, PayPal could be as big a business for eBay as eBay.com itself.

For several years, eBay has been two separate but related businesses. One of them, e-commerce, saw meteoric growth early on but matured very quickly. The other, PayPal, took years to ferment, but is positioned to deliver strong, steady growth for some time.

One of the most telling details of eBay’s analyst presentation was that it didn’t start off discussing eBay’s e-commerce business, but with PayPal’s. It could be a matter of time before it will make sense to change the company’s name to PayPal. Maybe then, it can shake off whatever ill-effects that grilled-cheese sandwich has been having on the company.