Reports that eBay may lay off three thousand employees in preparation for its spin-off of PayPal should come as no surprise. For the last two years, the hot tech stock market eBay’s has gone went sideways. Despite its PayPal subsidiary being the U.S. consumer’s favorite online payment mechanism, eBay failed to innovate. Once upon a time tech jobs were considered secure in America. But after years of poor performance by eBay, the spin-off of PayPal will undoubtedly be coupled with out-sourcing of jobs for the Internet retailer.
PayPal pioneered the online payment space in the late 1990s by providing fast and secure Internet transaction capability. PayPal was bought by eBay for $1.3 billion in late 2002. Since that time, the transaction side of the business has risen from 20% of eBay revenues to about 45% of total revenue today.
EBay’s retail revenue only grew by 9% last quarter to $2.17 billion.But PayPal’s revenue for the quarter jumped to $1.95 billion as the company added 4 million active registered accounts for a 15% gain to 152 million users.
A ComScore study last year found that PayPal was the favored brand with six times the usage compared to number two, Google Wallet. Fifteen months ago, eBay bought BraintreePayments for $800 million to improve PayPal’s’ penetration of mobile and in-app payments space.
According to a report by SiliconValley.com, when eBay breaks up early next year the online retailer will fire at least 10% of its 34,000-member worldwide workforce. The company has not yet filed a federally mandated Worker Adjustment and Retraining Notification Act (WARN), which requires 60 days’ notice before mass lay-offs of its 21,000 U.S. employees. But the company did say its does not comment on rumors That’s usually considered human resources code for “there will be significant bloodletting.”
Small and start-up companies are actively hiring for U.S. tech positions this year, but many Silicon Valley tech majors continue dumping U.S. jobs.
Consulting and major accounting firm BDO USA found in its latest report, based on interviews with 100 U.S. technology chief financial officers, that 63% of tech companies plan to outsource or manufacture products outside of the United States, up from 35% in 2011. The percentage was at the highest level since BDO began tracking U.S. tech out-sourcing expectations in 2008.
About 60% of U.S. tech manufacturing jobs have already been outsourced. But BDO expects that research and development, IT services, and programming and distribution to be outsourced rapidly. That describes a major percentage of eBay’s American workforce.
eBay is not alone in slashing jobs during a spin-off. When Palo Alto-tech giant Hewlett-Packard in October announced its intention to split into two roughly equal businesses, it said its workforce of about 300,000, that had already shed 45,000 positions, would undergo another 5,000 cuts. Mountain View-based security software provider Symantec announced recently that it would spin off its data-storage business and fire 2,000 employees, about 10% of its workforce.
Intel Corporation is slashing 5,000 positions, or 5% of employment, this year. Its newly built factory in Arizona, originally slated as a $5 billion project that was supposed hire 3,000 employees in 2013 to produce Intel’s most advanced chips, remains closed for the foreseeable future.
eBay is more profitable than PayPal, but competition from Amazon and China’s Alibaba are growing competitive threats. The Wall Street Journal has reported that eBay’s job cuts mostly will be in its marketplace division, its primary business, which offers Internet shopping sites, classified listings and advertising. As of the end of last year, that division boasted more than 128 million active users, meaning people who had bought or listed items for sale within the previous 12 months.