Tags: ebay | icahn | jobs | Enterprise Unit

EBay Cuts 7 Percent of Workforce, Agrees to Standstill With Icahn

Wednesday, 21 January 2015 08:29 PM

EBay Inc. is cutting 2,400 positions, buying back shares and entering into a standstill agreement with activist investor Carl Icahn as the company prepares to split its marketplace and payments businesses.

EBay, which also reported weak holiday sales and forecast sluggish revenue growth, also said it’s exploring options for its enterprise unit, including a sale or initial public offering. The company is adding three new board members, including a representative for Icahn, who had pushed the company to split up.

Chief Executive Officer John Donahoe is splitting off EBay’s PayPal payments division, which will free up the unit to seek alliances with other retailers and compete against a new crop of online-payment providers. EBay’s main marketplace, an operation with roots stretching back to Web commerce’s early days, is facing intense competition from Amazon.com Inc. and has responded by updating its look and forging retail partnerships.

“They bought back a lot of shares, they added one of Icahn’s employees to the board, they are cutting costs -- those are the things investors care about more than the actual performance of the company,” said Gil Luria, an analyst at Wedbush Securities Inc., who has the equivalent of a hold rating on the stock.

EBay’s board authorized $2 billion in additional share repurchases. Including the remainder of a previous program, the company said it plans to buy back $3 billion worth of stock.

The shares of EBay rose in extended trading after the announcements. The stock declined less than 1 percent to $53.37 at the close in New York, leaving it down 4.9 percent this year after climbing 2.3 percent in 2014.

Holiday Shopping

First-quarter revenue will be $4.35 billion to $4.45 billion, the San Jose, California-based company said in a statement on Wednesday, a prediction that fell short of analysts’ projection for $4.71 billion, the average of estimates compiled by Bloomberg. Sales in the fourth quarter rose 9 percent to $4.92 billion, the slowest holiday-quarter gain since 2010.

“My real concern is how the marketplace continues to lose ground in the e-commerce world,” said Kerry Rice, an analyst at Needham & Co. in San Francisco. “They are showing tremendous deceleration.”

The year-end holiday shopping season was a record for Web retailers, which were estimated to have sold about $61 billion worth of merchandise in November and December, according to ComScore Inc. EBay’s sales growth lagged behind Amazon’s, however, with same-store sales climbing 5.8 percent in December, compared with Amazon’s 22 percent, according to ChannelAdvisor.

Board Members

Fourth-quarter net income was $936 million, or 75 cents a share, up from $850 million, or 65 cents, a year earlier. Excluding certain costs, profit was 90 cents a share, compared with analysts’ average estimate of 89 cents.

Restructuring charges related to the job cuts, which will affect 7 percent of EBay’s workforce, will be $350 million to $400 million in 2015, the company said.

Frank Yeary, Perry Traquina and Jonathan Christodoro will join EBay’s board, the company said. Christodoro was nominated by Icahn as part of the standstill agreement with the activist investor. Standstills generally include limits on how much stock an investor can amass and agreements on shareholder voting and governance. Icahn’s deal includes “certain corporate governance provisions to be adopted by PayPal” after it separates from EBay, the company said today.

Corporate Overhaul

EBay built up its enterprise business with Donahoe’s $2.4 billion acquisition of GSI Commerce Inc. in 2011, an effort to boost revenue by helping big retailers manage their websites and inventory. The company was seeking to compete on the business side with Amazon by making itself a ready partner for retailers that wanted to streamline their online, mobile and traditional businesses.

In the statement today, Donahoe said that even though the enterprise unit is a strong business, “it has become clear that it has limited synergies” with either EBay’s marketplace or PayPal.

EBay is planning to complete the spinoff of PayPal in the second half. Devin Wenig, currently president of EBay Marketplaces, will become CEO of the marketplaces business that will remain, while Dan Schulman, who joined PayPal from American Express Co., will be CEO of the stand-alone PayPal payments company.

“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,” Donahoe said in the statement.

Donahoe and four other executives, including Chief Financial Officer Robert Swan, won’t join either successor company. Retaining those five executives until the deal closes will cost more than $35 million, according to a regulatory filing.

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EBay Inc. is cutting 2,400 positions, buying back shares and entering into a standstill agreement with activist investor Carl Icahn as the company prepares to split its marketplace and payments businesses.
ebay, icahn, jobs, Enterprise Unit
Wednesday, 21 January 2015 08:29 PM
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