EBay to cut jobs, sees revs at low end; shares fall
NEW YORK |
NEW YORK (Reuters) - EBay Inc (EBAY.O) said it plans to cut 10 percent of its work force and will spend about $1.3 billion on acquisitions to bolster its online payment and classified units as it tries to counter a weak U.S. economy.
Shares of eBay fell as much as 8 percent on Monday to their lowest level in more than five years, as the company said third-quarter revenue would come in at the low end of its forecast.
EBay said the job cuts would affect about 1,000 employees and several hundred temporary workers. The reduction is expected to incur restructuring charges of about $70 million to $80 million, mostly in the fourth quarter.
For the third quarter, eBay expects to hit the low end of its revenue forecast of $2.1 billion to $2.15 billion. But it said it would exceed the high end of its earnings forecast range of 39 cents to 41 cents per share, before items.
Investors are concerned a U.S. housing slump, higher fuel prices and a growing financial crisis are taking a greater toll on eBay's main online auction business, which has already faced slower growth in the last few years.
Chief Executive John Donahoe said the job cuts and acquisitions should make a more nimble company out of eBay and draw buyers to its site for the holiday shopping season.
"We're anticipating a competitive fourth-quarter holiday season," Donahoe said in an interview with cable channel CNBC. "We think consumers will be hunting for those deals."
EBay said it will buy the U.S.-based Bill Me Later payments service for about $820 million in cash and $125 million in options. The business offers consumers deferred payments and financing promotions.
It will be combined with eBay's PayPal unit and is expected to generate $150 million in revenue in 2009. EBay sees the deal closing in the fourth quarter and adding to earnings in 2011.
In the meantime, it will reduce operating earnings per share by 3 cents in the fourth quarter and by 6 cents in 2009.
EBay is also buying Danish online classifieds businesses Den Bla Avis and BilBasen for about $390 million.
Sanford C. Bernstein analyst Jeffrey Lindsay said investors were concerned about the deals eating into eBay earnings, but that they should help the company strategically.
"In the current environment, people will find it more difficult to get credit to buy things online. Provided they manage the risk carefully, Bill Me Later gives an excellent alternative," he said. "It might give a way that people will prefer to buy on eBay rather than go somewhere else."
San Jose, California-based eBay is scheduled to announce third-quarter results on Oct. 15.
EBay shares fell $1.42 to $17.52 after trading as low as $17.47 earlier in the session.
(Reporting by Martinne Geller; Editing by Derek Caney, Maureen Bavdek, Dave Zimmerman)
- Tweet this
- Share this
- Digg this