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eBay Lays Off 2,400 to Prepare for Change
eBay Inc. reported that revenue for its fourth quarter increased 9 percent to $4.9 billion. However, the San Jose, Calif.–based company is laying off approximately 2,400 of its employees, or 7 percent of its workforce.
The good news and bad news for the global commerce platform and payments company are symptoms of a reorganization lobbied for by activist investor Carl Icahn, who is the company’s largest active shareholder.
When Icahn started agitating for a split of eBay and its payments division, PayPal,last year, he noted that the entities would increase their value to shareholders if they were separate, publicly traded companies.
Icahn won the argument. On Jan 21, eBay officially announced that it had entered a “standstill agreement” with him. The company will observe changes to the way it is governed, and its payments division, PayPal, will be spun off this year, said John Donahoe, president and chief executive officer of eBay.
“Looking ahead, 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,” he said in a prepared statement.
Also, it was announced on Jan. 21 that Jonathan Christodoro, an Icahn Capital executive, would join eBay Inc.’s board of directors. In a separate statement, Icahn said that Christodoro built the foundation for a strong transition for eBay.
“I believe that, following the spin-off, eBay and PayPal will both be well-positioned to take advantage of multiple opportunities. Jonathan Christodoro serves as a director for Hologic Inc., Talisman Energy Inc. and Herbalife Ltd., where he has worked constructively and congenially with his fellow board members for years,” Icahn said.
An eBay announcement also divulged that the company would explore “strategic options” for its eBay Enterprise division, which manages e-commerce for large retailers. The strategic options may include a sale or perhaps an initial public offering.
With big changes ahead, Donahoe said that eBay had performed well.
“In a year of unexpected events and distractions, we ended 2014 with double-digit revenue growth, solid earnings growth and strong cash flow, reflecting the fundamental strengths of our company,” he said.
