eBay announced yesterday that it plans to cut around 2,400 jobs worldwide, around 7% of its workforce. The online retailer, whose model once seemed so radical, has struggled to keep up with changes to the way goods are sold online, with the revenue of its core Marketplaces business growing just 1% to $2.33bn year-on-year. The job cuts will fall across eBay’s Marketplaces, Enterprise and PayPal divisions.
While mediocre performance over Christmas has been blamed, it is also part of a wider restructuring for eBay, which announced on 30 September plans to split its central online sales business from the payments division PayPal later this year. eBay is now also looking to spin off its Enterprise division, which helps retailers to boost online sales.
John Donahoe, president and CEO of eBay, emphasised that Enterprise remained a “strong business and a leading partner for large retailers”.
“However,” he continued, “it has become clear that it has limited synergies with either business and a separation will allow both to focus exclusively on their core markets, as we create two independent world-class companies.”
Speaking more generally, Donahoe said, “In a year of unexpected events and distractions, we ended 2014 with double-digit revenue growth, solid earnings growth and strong cash flow, reflecting the fundamental strengths of our company.
PayPal had another strong quarter, finishing an excellent year. eBay, while facing challenges, continues to be a great business and is focused on stabilizing performance and engaging its core customers. Looking ahead, our plans are on track to separate eBay and PayPal into independent companies in the second half of 2015, and we are confident this is the right strategic path for each business.”
PayPal brought in 44% of eBay’s total revenue in 2014 and increased payment volume by 24% last quarter. Still, it has come under increased competition from new market entrants, in particular Apple Pay, which according to Apple CEO Tim Cook Apple Pay, activated more than 1m cards the 72 hours after its American launched on October 20.
Google, Apple and Facebook have all been rumoured to be interested in buying PayPal and activist investor Carl Icahn, who acquired a 0.82% stake in eBay last year, has negotiated the terms of the split such that a takeover of PayPal will be difficult to block.