Reportedly, eBay Inc. (EBAY) plans to cut 10% of its workforce or about 3,000 jobs in early 2015. This layoff could be part of the online retailer’s preparations to be a stand-alone company after its decision to spin off PayPal.
The workforce reduction is expected to be conducted primarily in eBay’s core marketplace business, which includes eBay.com and StubHub.
The restructuring announcement comes a few days after eBay decided to spin off PayPal into a publicly traded company in the second half of 2015. eBay has been enhancing its focus on the marketplaces business. In a bid to strengthen it, the company has adopted a fixed price format and undertaken several initiatives to attract big sellers and customers, improve technology and navigation of its properties, invest in better fulfillment services and especially focus on mobile customers. Its drive to provide complete online solutions for traditional retailers should further boost growth.
This job cut will further reduce operational costs in the Marketplace division. We believe a leaner cost structure will boost eBay’s margins and earnings growth in the near future.
Though PayPal is the company’s best-performing service and fastest-growing unit, the separation will likely give it more scope to form alliances with retailers and financial firms. This, in turn, will enhance competitiveness of both the companies in their respective fields.
eBay is one of the largest online retailers in the world and is poised to grow through strategic acquisitions. The company’s earnings of 58 cents exceeded the Zacks Consensus by a penny, helped by strong PayPal growth. However, sales of $4.35 billion were down 0.3% sequentially as the key Marketplaces business did not perform as well as expected.
Moreover, the increasing competition from major online retailers such as Amazon.com (AMZN), Alibaba Group Holding Ltd. (BABA) as well as many other smaller players remain a matter of concern. Additionally, Google is planning to foray in the online retail space, potentially increasing the competition. eBay’s growth rate is likely to suffer without PayPal — its rapidly-growing profitable payments business.
eBay shares currently have a Zacks Rank #3 (Hold). Another stock that is performing well at current levels include Stamps.com Inc. (STMP), sporting a Zacks Rank #1 (Strong Buy).
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