EBay Announces Job Cuts, Icahn Pact With Earnings--3rd Update

By Tess Stynes 

EBay Inc. announced a standstill agreement with Carl Icahn that will give the activist investor a board seat and said it plans to cut about 7% of its workforce, as the e-commerce giant prepares to spin off its PayPal electronic-payments business later this year.

The San Jose, Calif., company said the cuts will total about 2,400 jobs and occur across its eBay Marketplaces, PayPal and eBay Enterprise businesses. In December, The Wall Street Journal reported that the company was considering such a plan.

The company announced the agreement with Mr. Icahn and the job cuts with its fourth-quarter report, in which earnings rose 10% on continuing growth at its PayPal business.

EBay also said it would explore strategic options for eBay Enterprise, including a sale or initial public offering. EBay's enterprise business helps retailers with shipping from store locations and order management, among other services.

"Enterprise is a strong business," the company said, but "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."

The company's agreement with Mr. Icahn, the company's largest active shareholder, includes certain corporate governance provisions to be adopted by PayPal as an independent company. The agreement also appointed Icahn Capital executive Jonathan Christodoro to eBay's current board.

Mr. Icahn, in a statement on his website, said the corporate governance provisions includes limits on any so-called poison pills and prevents a staggered board at PayPal. The provisions were aimed at giving shareholders a greater ability to weigh in on any offers made for the company.

"In the end, it should be the shareholders' decision. This fundamental belief was the underlying philosophy of many of the corporate governance principles for which we advocated at PayPal," Mr. Icahn said. "We applaud eBay's board for making this agreement possible."

Mr. Icahn had repeatedly advocated for eBay to split well before the company announced its plans in September. The company said Wednesday that the split is still on track to occur in the second half of 2015.

Separately, eBay also announced the appointment of Wall Street executives Frank Yeary and Perry Traquina to its board. These appointments bring the total number of directors to 15, 13 of whom are independent.

Shares of eBay rose 3.5% in recent after-hours trading. Through Wednesday's close, the stock has risen nearly 16% from a two-year low in October.

With the breakup, eBay's traditional marketplace division will lose its fastest-growing division, one that was on pace to become the company's largest.

For the quarter, eBay reported earnings of $936 million, or 75 cents a share, up from $850 million, or 65 cents a share. Excluding one-time items, earnings were 90 cents a share.

Revenue rose 8.6% to $4.92 billion.

The company expected per-share profit of 88 cents to 91 cents and revenue of $4.85 billion to $4.95 billion.

In 2015, eBay expects revenue between $4.35 billion and $4.45 billion in the first quarter and $18.6 billion and $19.1 billion for the year. Analysts, on average, were expecting revenue of $4.7 billion in the first quarter and $19.97 billion for the year, according to Thomson Reuters.

As for earnings, eBay projected per-share results--excluding certain costs--between 68 cents and 71 cents in the first quarter and between $3.05 and $3.15 for the year. Analysts, on average, were expecting earnings of 76 cents in the first quarter and $3.26 for the year, according to Thomson Reuters.

Write to Tess Stynes at [e-mail]

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