Ebay CEO: Layoffs Not Due to Weak Economy

The decline in economy, stocks at all time lows, companies closing their doors or being bought out by larger entities. It’s all chaos right now, at least for some people.

Online marketplace giant Ebay has announced that it is cutting 10 percent (roughly 1,600 jobs) from its workforce.

Ebay claims this is the largest round of dismissals ever. About 1,000 full-time employees will be asked to leave, the remaining amounts will consist mainly of temporary and part-time workers. Ebay will also be closing the lid on any open positions currently available.

John Donahoe, Ebay chief executive, claimed in an interview that the cuts are not a reaction to the weak economy. Donahoe, who took over as CEO from Meg Whitman back in March of this year said Ebay’s leadership had been considering the cuts since mid-summer. The layoffs will enable Ebay to be “more responsive and nimble” and bring opportunities to reinvest in development and growth in areas such as PayPal. Quoting Donahoe :

“This is trying to position our company in the right way for the medium to longer term. I would say it is not a reaction to the short-term macro environment, or short-term pressures,”

This is the second round of cuts for Ebay this year – the first being rather small at 125 positions in Europe and 70 positions in San Jose, California – eBay headquarters. eBay anticipates restructuring charges to come in at $70 million to $80 million in relation to the job cuts. The end result will be $150 million in annual cost savings.

Donahoe did acknowledge that the weak economy is hurting Ebay’s business. Third-quarter revenue will be at the lowest end of their expectation scale – however being higher than previously expected back in July. Ebay shares fell $2.05, 11 percent, to $16.89 in afternoon trading. The shares have lost roughly half of their value this year alone.

On a side note, eBay mentioned on Monday that they will be purchasing Bill Me Later. Bill Me Later is a privately held company that lets online retailers give shoppers credit without detailed applications forms. The purchase is for about US$820 million in cash and US$125 million in outstanding options. Ebay plans to incorporate its Bill Me Later purchase into PayPal by the end of the year and its options available to consumers by the second half of 2009.

Ebay may be eyeballing this purchase as a means to attract buyers into larger purchases through the site in a safe and convenient manner. President Scott Thompson claims that people who use Bill Me Later tend to make much larger purchases according to statistical data.

Ebay has also purchased the Danish classified-ad site dba.dk and vehicles site bilbasen.dk for roughly US$390 million in cash. The acquisitions will add to eBay’s stable of classifieds sites such as Kijiji and Gumtree. According to Donahoe, eBay went after Bill Me Later and the Danish sites now because it is “a good time for smart investors that focus on the long term move. In times like this, strong companies have a potential to get stronger.”

Could the layoffs be due to a combination of the economy and the extra large purchases made by Ebay ?