Ebay cuts workforce by 10%, buys "Bill Me Later" service

In July, the California-based group reported its slowest sales growth since 1998 when it started selling shares to the public. In today’s announcement, eBay gave warning that while its third-quarter profits would exceed its forecasts, revenue would be at the “low end” of its predictions.

“While never an easy decision to make, these reductions will help improve our operations and strengthen our ability to continue investing in growth,” said John Donahoe, eBay’s chief executive.

The job cuts will cost eBay between $70 million (£39.9 million) and $80 million pre-tax, most of which will be recorded in the fourth quarter.

In the third quarter, eBay expects to hit the bottom end of its revenue forecast of between $2.1 billion and $2.15 billion and exceed the top end of its earnings forecast of between 39 cents and 41 cents per share, before items.

Shares in eBay fell by nearly 7 per cent to $17.63.

EBay said it will acquire Bill Me Later, an online payment service, for $945 million in cash and outstanding options. The company also announced that it would buy Danish online classifieds businesses Den Bla Avis and BilBasen for about $390 million.

The talk was ignited Monday by an article in Barron’s, which cited a report by Wedge Partners, a small Colorado investment-research firm. Wedge suggested that eBay was preparing layoffs that could hit up to 10 percent of eBay’s 15,000 employees.

An eBay spokesman said that the company “does not comment on rumors or speculation.” But the Wedge report has the ring of truth. EBay, the leader in online auctions, has been rocked this year by greater-than-usual rancor from sellers in the wake of significant fee changes and stagnant traffic to the site. Many analysts say the San Jose, Calif., company’s third-quarter performance has so far shown little improvement.