eBay, one of the largest e-commerce companies has announced a spinoff from its payments service PayPal. Ahead of this move they plan to cut about 7 percent of its staff spreading across various departments. John Donahoe president and CEO of ebay Inc said, “We plan to reduce our workforce globally by approximately 2,400 positions, which represents about seven percent of our global workforce, across eBay Marketplaces, PayPal, and eBay Enterprise. This was a difficult decision. Eliminating jobs is never easy. But it is necessary to reduce complexity and create more competitive cost structures.” Restructuring and separation costs are expected to be between $210 million and $240 million in the first quarter and $350 million to $400 million for the entire year.

Justifying the split John said “We will be exploring strategic options for eBay Enterprise including a sale or IPO. Enterprise is a good business but it has become clear that it has increasingly divergent opportunities and limited synergies with eBay. This move will help both businesses focus on their respective priorities moving forward.”

In the Q4 report PayPal’s revenue rose 18 percent to $2.16 billion whereas eBay’s marketplace unit increased just 1 percent to $2.33 billion. The split is planned for the second half of the year

eBay Inc also announced an agreement with activist investor who holds 3.7-percent stake in the company; Carl Icahn, that will give investors a greater say in its PayPal payments unit once after the separation and said it exploring a sale or public offering of its enterprise unit. This could indicate laying groundwork for future acquisitions of eBay and Paypal by emerging e-commerce and payment markets like Alibaba and Google. (reuters)

eBay shares were up 2.6 percent at $54.75 in after hours trade. The reported fourth-quarter earnings were slightly over Wall Street expectations, but its outlook for the 2015 first quarter and full year fell short of estimates. For the 2015 first quarter, eBay forecast earnings between 68 cents and 71 cents a share, below analysts’ estimates of 76 cents per share. Its revenue forecast of $4.35 billion to $4.45 billion fell short of the average Wall Street forecast of a little over $4.7 billion.

This week also saw the addition of 2 new board members- seasoned Wall Street executives Perry Traquina and Frank Yeary. NBC Universal executive Bonnie Hammer also joined the board earlier this month.

John stated, “As we look to 2015, we are taking decisive actions to address both the opportunities we see and the challenges we face. To that end, we’re streamlining our cost structure and portfolio as we set up eBay and PayPal to succeed as independent, public companies.” And signed off on a positive note, “Looking ahead, we are clear on what we need to do at eBay and PayPal to deliver on our 2015 plans.  I strongly believe that separation is the right path for our company, and we remain deeply committed to doing what’s best for our business, shareholders and customers.” (source: eBay)

 

(image credit: Kārlis Dambrāns)

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