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Ebay to cut 2,400 jobs this quarter, may sell enterprise unit

January 22, 2015 10:08 IST

Image: Visitors chat next to the Ebay logo at the CeBIT computer fair in Hanover.
Photographs: Tobias Schwarz/Reuters

Online retailer Ebay Inc said it plans to cut about 2,400 positions, or 7 percent of its workforce across eBay marketplaces, PayPal, and eBay enterprise in the current quarter to simplify its organizational structure.  

The company also said it will explore strategic options for eBay enterprise, including a sale or an IPO.  

EBay's net income rose to $936 million, or 75 cents per share, in the fourth quarter ended Dec. 31, from $850 million, or 65 cents per share, a year earlier.  

Revenue rose to $4.92 billion from $4.53 billion, boosted by its PayPal payments unit and higher holiday sales.  

EBay said in September it would spin off PayPal in 2015, freeing the unit from the slower-growing traditional e-commerce business to allow it to strike deals in the rapidly evolving payments space.  

Meanwhile, EBay Inc's plans to break up into three different companies could accommodate would-be suitors, signaling a potential merger fight after the breakup.  

The company plans to spin off its payments division, PayPal, from its core marketplace division in the second half of the year, making two standalone publicly traded companies that some analysts say could be worth more than the combined entity.  

On Wednesday, eBay added that it will sell or prepare a public offering of its eBay Enterprise unit, which the company bought for $2.4 billion roughly four years ago.  

The announced moves are intended to give each business the ability to consider all their alternatives, including a sale, eBay Chief Executive Officer John Donahoe said.  

"No one knows what's going happen down the road," Donahoe said in an interview on Wednesday, after eBay reported fourth-quarter earnings. "But each business will have the flexibility they need to do what they need to do to win."  

The moves come as Wall Street analysts question how long eBay and PayPal can withstand growing competition from online rivals such as Inc, Google Inc and Alibaba Group Holding Ltd, as well as retailers such as Wal-Mart Stores Inc which are investing in their own e-commerce and payments platforms.  

As part of the moves announced on Wednesday, eBay agreed to adopt a number of corporate governance changes championed by activist investor Carl Icahn that would limit PayPal board's ability to prevent a takeover once it splits from eBay.  

Any investor who owns 20 percent of PayPal will be able to call special meetings of shareholders, Icahn said in a separate statement that coincided with eBay's release.

EBay also outlined plans to cut 7 percent of its workforce, or 2,400 positions, in the current quarter.

"I don't think that is the primary goal, but in general these moves could make for a cleaner, or more attractive, merger or acquisition," said Baird analyst Colin Sebastian, who has previously said Google could be a suitor for eBay.

The eBay Marketplaces unit is now going after so-called "avid" shoppers hungry for a bargain.

Its enterprise division, which advises companies on how to grow online, will strengthen its relationships with top retailers and brands.

Potential buyers of eBay Enterprise include companies focused on building ties with other businesses, such as Inc, IBM Corp, Demandware Inc , Adobe Systems Inc or startup Bigcommerce, some experts said.  

Salesforce declined to comment, while the other companies were not immediately available for comment.

(Reporting by Lehar Maan and Deepa Seetharaman)

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