EBay Announces It Will Cut 2,400 Jobs Globally As PayPal Posts Surging Growth

Last year was a rocky one for eBay Inc., and on Wednesday the company announced it will do some streamlining: In the first quarter, the PayPal Inc. parent company, which reported a $41 million net loss for 2014, will lop off 2,400 jobs across all of its operating units, or about 7% of its global head count.

Asked by analysts during a conference call Wednesday afternoon where the layoffs will occur, eBay chief financial officer Bob Swan was not specific, but let it be known PayPal, which includes the thriving Braintree and Venmo payments units, will not be spared. The job cuts “will be a little bit higher on the [eBay] Marketplace side, a little bit lower on the PayPal side,” said Swan.

EBay also announced it is exploring a sale or initial public offering for eBay Enterprise, a unit that’s separate from the auction-based Marketplace and focuses on services for merchants.

On the fourth-quarter earnings call, both Swan and chief executive John Donahoe heaved a sigh of relief at the passing of 2014, which included a major data breach from which eBay has not yet fully recovered. “2014 was a year we’re quite frankly glad to see come to an end,” said Donahoe. EBay’s loss last year represents a $2.9 billion negative swing from 2013’s net income of $2.86 billion.

PayPal, on the other hand, enjoyed a stellar year, with revenue up 19% for the year, to $7.9 billion. Total dollar volume surged 27%, to $227.9 billion. On the call, Swan credited 6 points out of the percentage growth to Braintree, the Chicago-based processor and payments-app developer eBay acquired in 2013 for $800 million. Last year, PayPal reported that Braintree saw its third quarter volume soar 50%, to $700 million, compared to the second quarter. “On Braintree, growth has been relatively explosive,” Swan said Wednesday.

Donahoe applauded Braintree’s v.zero software development kit, which he said PayPal is adopting as the basis for its “next-generation platform,” its single-click purchase technology, One-Touch, and Venmo, Braintree’s mobile peer-to-peer payment service, which is especially popular among 20-to-30-year-olds. “Venmo is on fire,” said Donahoe.

Partly as a result of Braintree and Venmo, PayPal reported its mobile-payments volume jumped 70% in 2014, to $46 billion from $27 billion in 2013.

But that explosive growth is coming at a cost. Swan and Donahoe conceded pressure on PayPal’s transaction margins is likely to get worse in 2015. Swan attributed the compression to Braintree’s growth as well as PayPal’s increasing adoption by larger merchants. “We expect transaction margins to come down,” he conceded, without forecasting how much. Through the fourth quarter, PayPal’s transaction margin hovered steadily around 63%.

The two top executives had little to add regarding the impending split of eBay and PayPal into two separate, publicly held entities, announced last fall. The separation is expected to take place in the second half of this year, a timetable that eBay did not modify Wednesday.

EBay did announce a so-called standstill agreement with Carl Icahn, the company’s largest active shareholder, and added a board member, Jonathan Christodoro, from Icahn Capital LP. Early last year, eBay fought a proxy battle with Icahn, who pushed for a PayPal spinoff. After months of resisting Icahn’s campaign, eBay announced its separation plan in late September.

For the fourth quarter, PayPal reported 161.5 million active accounts, up 13% year-over-year. It generated $64.3 billion in volume on just over 1 billion transactions, up 25%. It was the first quarter in which the payments unit exceed the 1-billion mark in transactions.