EBay trimming jobs, buying companies to shore up business in turbulent times

Against the backdrop of an ailing economy, Internet auction house and retailer EBay said today it would lay off 10% of its global workforce, or about 1,000 employees and several hundred temporary workers, in an effort to shore up its businesses. EBay also said it plans to spend about $1.3 billion on acquisitions to pump up its online payment and classified advertising businesses as it tries to brace itself for the spreading financial crisis.

Shares fell as much as 8% in early trading to their lowest level in more than five years. Investors are concerned that EBay's online auction business is vulnerable as consumer spending declines, the U.S. housing market slumps and fuel prices remain high. The auction business has already faced slowing growth over the past few years. Chief Executive John Donahoe warned that economic weakness and the stronger dollar were affecting Ebay.

The San Jose company said the move to cut its 15,000-person work force was unrelated to the potential slowdown in e-commerce. Instead EBay is trying to make its business more competitive in the face of declining profits and stagnant growth.

EBay said it would take a restructuring charge of as much as $80 million in the fourth quarter. It will also eliminate open positions.

It also said it would hit the low end of its revenue forecast of $2.1 billion to $2.15 billion, but exceed the high end of its earnings forecast range of 39 cents to 41 cents per share, before certain items. The company had previously said it would report earnings between 30 cents and 32 cents a share. It will release its earnings on Oct. 15.

EBay had been the subject of layoff rumors for weeks.

The company also announced that it would buy PayPal rival Bill Me Later, an online payments firm based in Timonium, Md., for $945 million in cash and stock. It will combine Bill Me Later with ...

... its PayPal division, which already handles online payments on EBay and for other companies. In the third quarter, PayPal's total payment volume will be around $15 billion, Donahoe said in a conference call with analysts.

In another move, EBay said it would buy the popular Danish classified advertising sites DBA.dk and BilBasen for $390 million, part of its strategy to expand its classified advertising presence in Europe. EBay already owns other sites in Europe, including Spain's LoQUo, Britain's Gumtree and Germany's mobile.de.

EBay has a minority stake in the U.S. online classifieds site Craigslist. Its bid to buy Craigslist prompted the two companies to sue one another earlier this year. EBay is building up the U.S. presence of its European classified advertising site Kijiji as a competitor to Craigslist.

Classified advertising sites are also cheaper to build and operate. Under Donahoe, the new CEO, EBay has been looking to expand into new areas and implement changes to draw more buyers and increase revenues as its traditional auction business has sagged. Some of the moves have been unpopular with sellers.

Despite the market turmoil, Donahoe said EBay decided to move forward with the acquisitions because of its "strong financial position."

Donahoe said that EBay has "a strong set of assets with leadership positions in multiple businesses."

"I am committed to doing what it takes to maintain and extend these positions to drive long-term growth for our company," he said.

Donahoe told CNBC he expects the job cuts and the acquisitions will position EBay to be more nimble. He also predicted more bargain shoppers would turn to EBay during the upcoming holiday season.

"We think consumers will be hunting for those deals," he said.

-- Jessica Guynn

Photo: EBay CEO John Donahoe. Credit: EBay

Comments

[H.R. Woods]

If Google ever develops an auction service, sellers will stampede out of Ebay.

[Gene Venable]

Those of us who have come to hate eBay because of the recent changes making it more costly for non-professional sellers can only cheer. I have been boycotting eBay for quite awhile now.

[O.H. Boutilier]

I understand that every commercial entity has the right to prosper and profit, but for eBay, profit is the motivation, not the reward. Too bad. I'd migrate to google auction today if it existed.

[V krohn]

IF Google would buy out ebay no one would be happier than me...their quality and communication is poor, they have no concern for seller and now are going to charge 1 percent to transfer money from paypal to your bank account...along with alot of other stupid moves such as not being able to leave negative feedback to bad bidders/buyers but they can give you negative, what sense is that? they need NEW leadership, this new CEO has problems the last one was bad enough!!

[JM]

Ebay has seen very little activity from me this year. I still buy equipment just not on eBay. Frankly they've become way too beauraucratic. Too many rules and too little flexibility. Many of their sellers seem to think shipping charges are a PROFIT center. It's not uncommon for S&H to be 25 to 50% or more of selling price. That isn't eBay's doing but it's killing their business with customers like me. Everything gets too big, and fails, eBay is no exception. They need to wake up or they'll become a CASE study at the HBS, and the like. They're rapidly becoming yesterday's news.

[karen in TX]

Ebay for sale to the highest bidder? Going, going, HOPEFULLY gone soon! To anyone who wants to re-make it into the presence we all knew & loved! I barely recognize it now. Even buyer & seller can hardly communicate, since the paranoid Ebay hides their email addresses from each other, fearing they might consummate their transaction outside of Ebay. Such a sad state of affairs....

[Jay]

Ebay has lost touch with the sellers who made eBay what it is today. Without sellers, there will be no buyers, and subsequently no ebay. Paypal fees are extortionate. The one-sided feedback system is a farce. Ebay going, going, GONE! Hopefully!

[Dif]

I don't want to be dramatic (especially since I have no business running on eBay), but getting into cut 10% of workforce to save moneys is definitely not a good sign.

[Jim C.]

As someone who has sold over 8,000 items on ebay i say its about time. The constant level of change that has taken place in ebay over the past few years plus a staff of people calling to tell me what they have already informed via email let me know that there were way too many people working there justifying their jobs by doing something even if it was totally unnecessary.
The manure is really going to hit the fan later this month when ebay moves to a policy of not allowing payment with check or money orders aggravating both buyers and sellers.

[Beth]

Ebay can go down the drain and I will dance on its grave. It took something that was good for the little guys to be able to sell what they didnt need or had more then one of to a corporate pig that doenst care abotu the little guy. The fees are exorbitant, and make selling a joke, and add on to that the new paypal only rule?? I thought monopolies were illegal, and I am surprised the CC compnaies arent screaming about the fees they will lose..