eBay to cut 10% of its workforce

This is not a financial sector post but I find it shocking enough that eBay is cutting 10% of its workforce that I had to post this. Now, this could be as unrelated to the current economic malaise as Yahoo’s problems and rumored future job cuts are.

But, if high growth technology companies are cutting workers, this can’t be good for the employment market in the U.S. or the housing market in Silicon Valley.

Online auction house eBay is axing 1,000 jobs or 10% of its global workforce as it looks to save $150m (£85m) a year in the face of slowing sales, in the latest evidence that gloom in the world economy is starting to impact major dotcom companies.

But the company also shocked Wall Street by announcing it is spending $1.3bn on acquisitions, including $820m in cash on internet payments company Bill Me Later, which lets American shoppers make purchases online without having a credit card, to bolster its PayPal payments operation.

It is also buying Danish online classifieds site dba.dk and vehicles website bilbasen.dk for approximately $390m, also in cash.

The auction house’s chief executive, John Donahoe, admitted: “To some it may seem a counter-intuitive to be making these deals but we believe it is an appropriate time to bring these companies into our portfolio.”

He stressed that eBay’s financials are strong and the current turmoil in the market will make “the strong stronger”, but admitted “the economy and the strong dollar are impacting our business”.

The company will announce its third-quarter results next week but eBay said today that it expects to hit the low end of its revenue guidance, although its profits per share will be better than expected. The job losses will result in a $70m to $80m restructuring charge which the company will take in its fourth quarter.

Bill Me Later has deals with over 1,000 retailers who use it on their websites or in their phone sales departments. It has more than 4 million signed up users who can buy from these retailers. They then receive a monthly bill which they can pay by cheque, money order or another bill pay system, but not a credit card.

Retailers, however, can use it to offer interest-free credit and buy now, pay later offerings which are likely to be extremely popular at a time when America’s banking industry is in crisis.

On a call with analysts the eBay and PayPal management team stressed the expertise within Bill Me Later, which was set up just 8 years ago, but analysts have concerns that the deal will leave eBay even more exposed to the worsening U.S. economy.

As one Wall Street analyst asked on the conference call: “Who’s on the hook if the consumer cannot pay for that flat-screen TV?”

The resounding answer that came back was “Bill Me Later.”

Auction house eBay axes 1,000 jobs – Guardian

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