Coverage: eBay to cut jobs

EBay earnings offered a lot of news for investors on Wednesday. The company beat expectations, said it was going to cut jobs, and announced Carl Icahn would join the board.

Kaja Whitehouse had these details in her story for USA Today:

Online retailer eBay on Wednesday beat earnings expectations but warned of plans to reduce its global workforce by 2,400 jobs, or 7%, in the first quarter of this year.

The company’s stock dropped on the earnings release, but popped shortly thereafter — likely on news the company gave billionaire investor Carl Icahn’s company a seat on the board of directors.

EBay also said it plans to explore strategic options for eBay Enterprise, which advises retailers on e-commerce, including a sale or IPO.

The online retailer said it earned 90 cents a share for the three months ended in December on revenue of $4.92 billion. That’s better than Wall Street’s expectations for eBay to report earnings of 89 cents a share in the fourth quarter, and above earnings of 81 cents a share posted this time last year.

Wall Street analysts expected slightly higher revenue, however, of $4.93 billion for the period, up from the $4.53 billion in last year’s fourth-quarter.

Writing for The New York Times, Mike Isaac said that the layoffs were coming from competition in the online retailing space:

Facing stiff competition and the declining growth of its auctions business, eBay announced a shake-up of the company on Wednesday, announcing plans to cut 2,400 positions, or 7 percent of its global work force.

“It’s going to get a little bit worse before it gets better,” said Bob Swan, chief financial officer of eBay, citing declines of traffic and repeat customers in the company’s online auction business. “Our ecosystem has simply been disrupted.”

The layoffs come in advance of a planned spinoff of PayPal, the company’s payments arm, set for later this year.

EBay said it would also explore a sale or a possible initial public offering of eBay Enterprise, the company’s warehouse and logistics unit for third-party eBay sellers.

It was an abrupt about-face from the vision of the company laid out by John Donahoe, the chief executive, no more than one year ago. Mr. Donahoe had said eBay’s strength lay in the combined operations of its three divisions: Marketplaces, Enterprise and PayPal.

Re/Code’s Jason Del Ray detailed some of the recent problems eBay had last year, dragging down results:

On a conference call with analysts, CEO John Donahoe once again focused on the challenges the company faced in 2014, which negatively impacted fourth-quarter results. The company reset all of its customers’ passwords after a security breach and also got penalized from Google, which resulted in a chunk of eBay pages being knocked out of some search results. Sales in eBay’s marketplace division were negatively impacted by a strong dollar, which raised the prices of goods for international buyers.

Taken together, those events “overwhelmed the progress we were making,” Donahoe said, and will likely affect results through next quarter. eBay Marketplaces revenue grew just 1 percent year over year to $2.33 billion.

Donahoe and CFO Bob Swan said the company has been ramping up marketing and working on search engine optimization fixes to combat these challenges.

Donahoe said eBay also plans to find a new home for its Enterprise unit, either through a sale or IPO, to help refocus on the core Marketplaces businesses. eBay Enterprise revenue grew nine percent year over year in the fourth quarter, from $407 million to $443 million. The unit includes its Magento division, which makes software tools that power online retail sites for mid-sized brands. eBay Enterprise also offers services such as warehousing as well as fulfillment for brick-and-mortar stores that want to offer ship-from-store or in-store pickup capabilities.

The Wall Street Journal story by Tess Stynes had these details about Icahn’s new role in the company:

The company’s agreement with Mr. Icahn, the company’s largest active shareholder, includes certain corporate governance provisions to be adopted by PayPal as an independent company. The agreement also appointed Icahn Capital executive Jonathan Christodoro to eBay’s current board.

Mr. Icahn, in a statement on his website, said the corporate governance provisions includes limits on any so-called poison pills and prevents a staggered board at PayPal. The provisions were aimed at giving shareholders a greater ability to weigh in on any offers made for the company.

“In the end, it should be the shareholders’ decision. This fundamental belief was the underlying philosophy of many of the corporate governance principles for which we advocated at PayPal,” Mr. Icahn said. “We applaud eBay’s board for making this agreement possible.”

Mr. Icahn had repeatedly advocated for eBay to split well before the company announced its plans in September. The company said Wednesday that the split is still on track to occur in the second half of 2015.

Separately, eBay also announced the appointment of Wall Street executives Frank Yeary and Perry Traquina to its board. These appointments bring the total number of directors to 15, 13 of whom are independent.

The company is working hard to come back from 2014 and all the struggles. By putting Icahn on the board, eBay could gain some points for listening to shareholders. But the layoffs and abrupt turnaround on strategy by management could undermine some of that confidence.