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With EBay layoffs possibly looming, is Silicon Valley slowing down like it's 2000?

September 18, 2008 |  3:43 pm

EBay CEO John DonahoeIf the Wall Street meltdown wasn't depressing enough, Google chairman Eric Schmidt and founder Sergey Brin fielded questions about the state of the Silicon Valley economy Wednesday. Their conclusion: Not so good.

And it's not just that the whole Web 2.0 thing is starting to seem played-out. A malaise has been creeping into the high-tech sector.

Sources of funding for start-ups have been drying up. Major companies, including Google, have seen their once soaring shares decline (even after rising nearly 5% today, the Nasdaq is down 17% in 2008). Hewlett-Packard and others are laying off thousands of employees. Nielsen Online said today that online banners and other display ads, lifeblood for many Web companies, declined 6% in the first half of the year over the same period last year, as financial services companies in particular cut back.

And this week, people are expecting more layoffs at EBay -- as many as 1,500 folks. It all began with an article in Barron's on Monday that cited a report from a Colorado investment research firm, suggesting that EBay would cut 10% of its 15,000 employees. Wedge Partners' Brian Blair and Ryan Hunter wrote that the company's business was "deteriorating."

Of course, EBay doesn't comment on rumors or speculation. And many analysts are bullish on the moves by Chief Executive John Donahoe, who took the reins from Meg Whitman in March, to shore up the San Jose auction company's business. But Wedge Partners is giving EBay a low bid of confidence. A key factor will be the performance of a new search platform the online auction powerhouse is rolling out soon, Wedge said.

There is no question that EBay has had its share of challenges this year. And it may need to trim its workforce, analysts say. Trouble is, they say, EBay is probably not alone.

-- Jessica Guynn

Photo: EBay Chief Executive John Donahoe. Credit: EBay