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EBay CEO embraces bold changes to spur growth
October 6, 2008 / 10:24 PM / 9 years ago

EBay CEO embraces bold changes to spur growth

<p>John Donahoe, eBay President and Chief Executive Officer delivers the keynote address during the annual meeting of shareholders and auction sellers in Chicago, Illinois, June 20, 2008. REUTERS/Frank Polich</p>

SAN FRANCISCO (Reuters) - Staff cuts and new acquisitions will help eBay Inc (EBAY.O) compete in the long-term, while new incentives in its core auctions business will spur consumer shopping this holiday season, eBay’s chief executive said Monday.

“This is a time where eBay is putting its foot on the gas in terms of investing for future growth,” CEO John Donahoe told Reuters in an interview. “Times like this are times when the strong companies can get stronger.”

Investors have shown their weariness with eBay, as it maps out a formula for winning back online shoppers who may have outgrown eBay’s web auctions format, or gravitated to rivals. Shares are down 56 percent from a high reached last October, including a 6 percent fall on Monday’s announcements.

Still, the changes made this year show eBay rejecting its past pattern of small, incremental tweaks to its business model and embracing bold change, said Pacific Crest analyst Steve Weinstein.

“He has certainly been in the process of making tough changes,” Weinstein said of Donahoe, who took the CEO role in March. “He’s made some pretty bold moves by historic standards.”

EBay announced on Monday that it would cut 10 percent of its global workforce, representing the most significant layoffs in its history. It also said it would buy U.S. online payments company Bill Me Later for about $945 million and Danish online classifieds businesses Den Bla Avis and BilBasen for $390 million.

Donahoe said the latest moves will create a leaner, more nimble eBay to better compete over the next year and a half, while investing in higher-growth areas like online payments and classifieds.

He noted that the purchase price for Bill Me Later in cash and options was half the price eBay would have paid a year ago.

The San Jose, California-based company has made several other changes this year, from reduced listing fees to better fraud protections and an enhanced buyer-seller experience.

All are intended to revive growth in the company’s main auction business for buying and selling items online, where growth has slowed in recent years.

One of the boldest initiatives came in August, when eBay cut its prices on fees for fixed-price items, which are attractive to buyers faced with a host of competitive deals on the Internet.

“We’ve seen a large increase in listings in all of the major countries in which we made the move, particularly in fixed listings,” Donahoe said.

Whether those changes are enough to lure back buyers and sellers to eBay and calm investor concerns will play out in coming quarters. On Monday, the company warned that third-quarter revenues would be at the low end of its forecast.

EBay reports third-quarter results October 15.

Retail experts are predicting this holiday season will be a bleak one, amid the weakening U.S. economy, a credit crisis that is now international in scope, and an ongoing housing slump.

“There is no doubt consumer spending has tightened,” Donahoe said. “We see that both on eBay and PayPal and as well the strength of the dollar is influencing cross-border trade,”

“We’re focused a lot on helping consumers get through this time and holiday season by offering the lowest prices, helping entrepreneurs (to set up businesses on eBay) ...” he said.

Editing by Bernard Orr

Our Standards:The Thomson Reuters Trust Principles.
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