E-commerce giant eBay Inc. recently announced that it would be cutting 7 percent of its workforce.
Exactly 2,400 workers will lose their jobs in this round of cuts.
The e-commerce company based in San Jose, California, says that it plans to split with electronic payment company PayPal, later in the year.
PayPal will be removed from the company’s operations to transition into an independent publicly-traded business.
This division of eBay Inc. will not only affect the PayPal business and eBay Marketplace, but will also transcend into the eBay Enterprise.
The reason behind the job cut and break from PayPal has nothing to do with the corporation suffering from financial problems.
eBay Inc. has been doing quite well financially. It has even added two new members to its board of directors.
Its fourth quarter report showed a 10 percent gain in earnings. eBay’s revenue went from $850 million in 2013 to $936 million in 2014. Full-year revenue also increased by 12 percent this past year.
The company’s stocks experienced a 2.5 percent upsurge—nearly reaching over 16 percent since a two-year low in shares last October.
The company is aware that it will be losing one of the fastest growing divisions of the enterprise; that was sure to become its biggest hit.
However, PayPal’s CEO John Donahoe said 2014 was full of distractions, and he expects this year to bring even better results for the business.
"EBay while facing challenges, continues to be a great business and is focused on stabilizing performance and engaging its core customers," Donahoe vouched for the company.
Compared to eBay Inc.’s other subdivisions, PayPal has played a major part in eBay’s success story.
Fourth-quarter earnings and full-year revenue varied for all three divisions:
- The Enterprise generated $443 million in the fourth quarter. In 2014, it earned a total of $1.2 billion.
- PayPal generated an 18 percent increase to $2.2 billion during the fourth quarter. Its earnings were $7.9 billion last year, which was a 19 percent increase for the subdivision.
- The Marketplace, which is the strongest segment at the moment, beat PayPal by only a small margin. It profited $2.3 billion in the fourth quarter and also earned $8.8 billion for that entire year.
"Enterprise is a strong business," the eBay Inc. said in a statement, according to MarketWatch.
However, it’s clear that both entities have separate agendas to pursue if they want to continue to be sufficient.
"It has become clear that it has limited synergies with either business and a separation will allow both to focus exclusively on their core markets," continued eBay Inc.
What also adds fuel to the fire is that the company was dealing with a "standstill" business contract with shareholder and investor Carl Icahn. After adding Icahn’s Capital Executive Jonathan Christodoro to eBay’s board of directors, PayPal has agreed to adopt certain changes in exchange for its independence.
Additionally, eBay wants to part ways with its struggling Enterprise unit, which it invested $2.7 billion into a few years ago. It plans to either sell the company or "hold an initial pubic offering" as a way to combat falling sales.