eBay Inc. (NASDAQ:EBAY) is self-imploding. Today the company announced that they are spending about $1.34 billion to buy Bill Me Later and two German Danish classified companies: Dba.dk, and bilbasen.dk. In the same press release that they sent out about the acquisition news, they also put information regarding headcount reduction. eBay is going to layoff approximately 10% of their workforce. In a company that has about 15,500 employees, this could affect 1,5500 employees.
?We are making aggressive moves to strengthen our leadership positions in e-commerce and payments to competitively position our company for long-term growth,? stated eBay President and CEO John Donahoe. ?Bill Me Later is a perfect complement to our portfolio, a company that belongs with PayPal. Together, PayPal and Bill Me Later will make online payments safer, easier and more convenient than ever.?
Acquiring Bill Me Later is a horizontal integration strategy. Bill Me Later competes directly with PayPal so essentially eBay is buying out their competition. Bill Me Later has over 100 employees and makes over $60 million per year. Bill Me Later raised over $200 million in funding before they were acquired. The investors involved with Bill Me Later includes Azure Capital Partners, Crosspoint Ventures, GRP Partners, Kingdon Capital, and Amazon.com. eBay bought out Bill Me Later for $945 million ($820 in cash and $125 in stock).
The two German Danish companies were bought for $390 million in cash.
When you announce a massive job cut and a major acquisition on the same day, it tends to raise a few eyebrows. I’ve never been the CEO of a Fortune 500 company, but I can anticipate that this will affect employee morale. The pattern I’ve seen is that when layoffs are announced, it affects job security.
When job security is threatened, you will see an exodus of some of your employees. Just look at Yahoo! as an example. As soon as Yahoo! executives and employees realized how insecure their jobs were and lost faith in management, they exited. TechCrunch has counted over 114 executives leaving between January 2007 and June 2008.
I expect that a large number of seasoned eBay executives will start finding alternative jobs. eBay is making some questionable decisions here. But they have monopolized the online auction market. When people want to buy and sell used goods, this is the first place that they think of. Craigslist is another place, but eBay is also an owner of that company too.
eBay employees and users are constantly becoming infuriated by company decisions. I give it about two or three more years for an alternative to come out and give eBay a run for it’s money.
Revisions: See comment #1