By Greg Bensinger
EBay Inc. is cleaning house before its planned breakup later
this year.
The Internet commerce company is cutting 2,400 jobs, adding
three board members and exploring the sale or spinoff of its eBay
Enterprise unit, which helps companies with their Web sales
efforts.
The changes will make both eBay and its PayPal payment-services
unit more attractive takeover targets once the split is complete.
The job cuts, mostly in the core marketplace unit, represent
roughly 7% of the workforce.
Investors cheered eBay's moves, sending shares of the San Jose,
Calif., company up roughly 2% in trading after the market's close.
The e-commerce pioneer also reported a 10% increase in net income
for the fourth quarter, but sales growth came almost entirely from
the PayPal and Enterprise units, not its initial online auction
marketplace.
"EBay is preparing themselves for this spinoff, and they are
unlocking all the value they can out of the business," said Colin
Gillis, a BGC Partners analyst. "When they complete the split,
PayPal is likely to be the most attractive."
Further cementing that notion, eBay said it reached an agreement
with investor Carl Icahn to add Mr. Icahn's business partner,
Jonathan Christodoro, to its board and to limit PayPal's corporate
defenses once it is spun off. For example, PayPal agreed that its
entire board will be elected annually, which makes it easier for an
outsider to instigate change.
Also, holders of 20% of PayPal's shares can call a special
meeting to oust directors or press other proposals, easing the path
to corporate changes.
Those and other provisions leave PayPal more vulnerable to
activist investors or unsolicited corporate bidders. Mr. Icahn and
analysts have said a stand-alone PayPal could be an attractive
takeover target. It was Mr. Icahn who pushed for eBay to split off
the PayPal unit.
"If an offer is made for a company it should be the decision of
the shareholders--not the board--to decide whether that offer is
worth accepting," said Mr. Icahn on his blog.
Speaking about the earnings results, eBay Chief Executive John
Donahoe struck a grim tone on a call with investors and analysts
Wednesday.
"This is not business as usual," he said. "2015 will be another
challenging year and we expect eBay's performance to soften further
before we see stabilization."
Mr. Donahoe, who plans to step down following the split, said
changes to Google Inc.'s search algorithm had hit eBay particularly
hard, pushing online shoppers to other sites.
At eBay's core marketplace unit revenue inched up 1%, to $2.33
billion. By contrast, PayPal reported a 18% jump in sales to $2.16
billion. Revenue at the Enterprise division grew 9%, to $443
million.
Overall, eBay revenue rose 8.6% to $4.92 billion, and net income
increased to $936 million from $850 million a year earlier.
For this year, eBay projected sales of $18.6 billion to $19.1
billion, far short of the $20 billion projected by analysts. EBay
said it expects $350 million to $400 million in expenses related to
the split.
EBay said its number of active buyers grew 5% in the quarter,
compared with a full-year average of 11%.
The plan to cut 2,400 positions will result in a $100 million
charge in this year's first quarter; over time, eBay said it
expects the cuts to save $300 million this year.
EBay also added to its board Frank Yeary, a former Citigroup
Inc. mergers and acquisitions executive, and Perry Traquina, a
former CEO of Wellington Management Co.
With the plan to jettison the Enterprise unit, eBay will return
to its roots when it held no inventory nor operated warehouses.
EBay bought the division four years ago for about $2.4 billion when
it was known as GSI Commerce.
The agreement with Mr. Icahn comes as other companies with
fledgling spinoffs are taking the opposite tack, that is,
increasingly arming themselves with tools to ward off shareholder
pressure and unwanted suitors.
Liz Hoffman contributed to this article.
Write to Tess Stynes at tess.stynes@wsj.com
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