Credit: Ebay

Ebay, why are you slashing 2,400 jobs? 'Because Icahn.'

The online marketplace is getting in shape ahead of a sell-off of PayPal and its enterprise arm.

by Jack Torrance
Last Updated: 22 Jan 2015

Job cuts are often a sign of bad performance but yesterday evening the ecommerce company Ebay announced it would be axing 2,400 jobs, roughly 7% of its workforce, despite reporting sales growth of 12% in 2014. Why? According to the jargon-packed statement, it's part of an attempt to '[simplify] organisational structures to focus the businesses and ensure that we are set-up to compete and win'.

So far, so standard corporate cost-cutting then. A key factor, though, is Ebay's plan to sell off PayPal, its online payments business, and possibly Ebay Enterprise, which provides marketing and ecommerce services to small companies. Trimming the fat makes the businesses a more attractive prospect for buyers.

PayPal, which was acquired by Ebay for $1.5bn (£1bn) in 2002, has long been tipped for a spin-out and momentum has been ramped up thanks to the interest of everyone's favourite activist investor Carl Icahn, who owns around 3.7% of the company. Yesterday it was confirmed Ebay and Icahn had agreed a series of governance measures that would make it easier for investors to influence PayPal. In addition, one of Icahn's partners, Jonathan Christodoro, would join the board – with the option to move over to PayPal once the spin-off occurs.

The move would certainly give PayPal more flexibility to succeed. Some suggest that other big tech companies like Amazon, Apple, Google and Facebook are reluctant to use its services because it is too close to Ebay. It could even become a target for takeover by those same giants – a prospect which Icahn seems to be interested in.

'As we have said many times in the past, we believe that if an offer is made for a company it should be the decision of the shareholders – not the board – to decide whether that offer is worth accepting,' he said.

The bigger picture, of course, is that Ebay could be a takeover target in and of itself. Despite its early and rapid rise, it hasn't made quite the same impact as its fellow tech giants. China's rapidly ascendant Alibaba, which is surely eyeing massive expansion in western markets, could certainly see Ebay as a valuable target.

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