Are Layoffs Coming From eBay?

Rumors in the investment community persist that eBay will soon lay off up to 10% of the workforce.

This story first surfaced in an article in Barron’s Weekly citing a report by a research firm, Wedge Partners. eBay’s stock was trading new its 5 year low today hitting $21.75. 

If eBay were to cut the jobs it would signal that eBay’s business is deteriorating faster than most market analysts thought, but confirm the comments of many eBay sellers who have seen lower sales of late.

Several investment analysts have recently upgraded eBay to a Buy. But eBay’s recovery could be a while in coming. Although a layoff would probably boost the stock price. eBay currently generates about $455,000 in annual sales per employee. A 10% cut in staff could theoretically boost that to over $500.

eBay currently employs over 15,000 people so that would amount to 1500 job cuts.  Most of the cuts would be at their San Jose campus and their Salt Lake City operations center. Cutting 1500 jobs would save eBay slightly over $100 million over a year’s time. If eBay can do that and stop their sales from deteriorating further by bringing buyers and sellers back to the platform, that would give a big boost to eBay’s profits and their stock price.

eBay has initiated several pricing and policies designed to make the site more buyer-friendly. Many of the policies have angered sellers, but the policies are still too new to show results. 

I found a blog called Seeking Alpha that has a pretty good analysis of where the layoff would come from. Here is the link: http://seekingalpha.com/article/95515-how-would-an-ebay-layoff-impact-sellers?source=yahoo

When I talk to other sellers, I don’t really see that many actually leaving eBay. Mostly it’s a case of sellers seeing their growth as coming from other online platforms such as Amazon.com, Overstock.com, Bidz.com and their own websites. So although they are still selling on eBay, they are growing their business on these other platforms. This is true in my case. My non-eBay sales now account for a larger part of my sales (about 15%) than they did at the same time last year.

The other factor that could hurt eBay’s profits in the Fourth Quarter is the recovery of the US Dollar against the Euro and the British Pound. The European market accounts for a large part of eBay’s (and PayPal’s) profits. A stronger dollar could hurt those profits. On the upside, PayPal and Skype continue to do very well and PayPal is said to be taking steps to increase their margins.

The Fourth Quarter will be very interesting both for sellers  –and for investors.

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