Investors are starting to buy into eBay's value creation strategy, and the stock has risen8.7% since it released its fourth quarter earnings report in January.
Although its Marketplaces unit is still reeling from a sharp drop-off in active customers due to a data breach last year that required widespread password resets, management will be able to focus more of its attention on the struggling unit after the PayPal spinoff later this year. Let's walk through eBay's latest earnings call to see what investors should know about the company going forward.
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PayPal delivering strong results Despite the burgeoning supply of new online payment services, PayPal continues to grow revenue by double digits and add an impressive number of new users. The payment service's revenue increased 18% on a currency-neutral basis during the fourth quarter and added nearly 5 million active accounts -- bringing its total to 162 million active accounts. EBay CEO John Donahoe remarked:
Marketplaces continues to struggle EBay Marketplaces suffered a major data breach in May 2014 that led to a sharp drop-off in traffic; although the website's most loyal customers are still active, the company has had difficulty luring back casual users. Donahoe says it will take more time to correct the issue:
Spin-offs and layoffs With Marketplaces struggling to grow, it's no surprise that the company is making changes to streamline its business. Management is exploring the sale or initial public offering of Enterprise so that management can refocus its efforts on Marketplaces. Also, the company intends to lay off 2,400 employees across all of its business units -- roughly 7% of eBay's global headcount. CFO Robert Swan talked about the expected benefits from the layoffs:
Mobile commerce exploding EBay's mobile commerce volume in 2014 increased 66% to $54 billion. Mobile payments now account for nearly one-fourth of all payments across all of eBay's business units. The mobile payments arena is becoming increasingly competitive, with a number of start-ups and major tech companies launching their own systems. Donahoe emphasized the importance of remaining innovative in the space:
Marketplace is a long-term project After the PayPal spin-off and the Enterprise sale or IPO, Marketplaces will be eBay's core business. However, management believes the unit still has a long road to recovery; while PayPal is expected to produce robust sales growth and margin expansion, eBay's results will be tempered by its ongoing challenges. Donahoe warns:
The article 5 Things eBay's Management Wants You to Know originally appeared on Fool.com.
Ted Cooper has no position in any stocks mentioned. The Motley Fool recommends eBay. The Motley Fool owns shares of eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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