eBay Inc. reported its fourth quarter and fiscal 2014 earnings Wednesday after the bell, and although the results were slightly better than expected, CEO John Donahoe announced a significant workforce reduction and the possibility of more company breakups.
Donahoe said approximately 2,400 eBay workers across eBay Marketplaces, PayPal, and eBay Enterprise will get the ax. He also said the company is exploring "strategic options" for eBay Enterprise, which could include a possible sale or an IPO.
"Enterprise is a strong business and a leading partner for large retailers, managing mission critical components of their e-commerce initiatives," Donahoe said in prepared remarks. "However, it has become clear that it has limited synergies with either business and a separation will allow both to focus exclusively on their core markets, as we create two independent world class companies."
As for its Q4, the results were basically in line with analyst expectations. The San Jose, Calif.-headquartered corporation reported a net income of $936 million, or 75 cents per share (statement).
Non-GAAP earnings were 90 cents per share on a revenue of $4.9 billion, up 9 percent year-over-year.
Wall Street was looking for earnings of 89 cents per share on a revenue of $4.93 billion, after eBay chopped its outlook when it reported third-quarter results. Previously, analysts were expecting earnings of 91 cents per share on revenue of $5.16 billion.
In regards to earnings and revenue, Donahoe acknowledged the "unexpected events and distractions" that made headlines throughout the year, but remained optimistic thanks to the company's solid earnings growth.
"In a year of unexpected events and distractions, we ended 2014 with double-digit revenue growth, solid earnings growth and strong cash flow, reflecting the fundamental strengths of our company," Donahoe said. "PayPal had another strong quarter, finishing an excellent year. eBay, while facing challenges, continues to be a great business and is focused on stabilizing performance and engaging its core customers."
PayPal was the most significant growth driver for the quarter, bringing in $2.2 billion in revenue while increasing payment volume by 24 percent. eBay's Marketplaces and Enterprise units were less impressive, although they did see a slight uptick year-over-year.
Looking ahead, Donahoe reassured that plans to separate eBay and PayPal into independent companies are on track for the second half of 2015.
It seems that eBay has also reached an agreement with activist investor Carl Icahn over his recommended appointment of Icahn Capital executive Jonathan Christodoro to eBay's current Board of Directors. The agreement allows Icahn to determine which board Christodoro will serve on at the time of the PayPal/eBay separation -- but it can largely be seen as a way to keep the investor from inciting more conflicts and takeover threats.
In a separate press release, eBay also announced the appointment of Wall Street executives Frank Yeary and Perry Traquina to its board of directors.