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eBay buys PayPal competitor for $1bn

Online auction site also to offload 1,000 staff

eBay announced two acquisitions Monday, at the same time saying it will lay off over 1,000 staff worldwide and cut back on recruitment.

It will pay almost $1bn for US online payment company Bill Me Later, and around $390m in cash for the operator of two Danish classifieds sites, dba.dk and bilbasen.dk.

Bill Me Later is second only to PayPal, the online payment operator that eBay already owns, the company said. The two services complement one another, with Bill Me Later able to offer delayed payment or financing options to eBay customers using PayPal, it said.

eBay will pay $820m in cash and $125m in outstanding stock options. It expects to close the deal by the end of the year.

Today, PayPal serves primarily small and medium-size businesses, but the acquisition of Bill Me Later will allow the company to target larger customers, said PayPal President Scott Thompson in a conference call for investors.

PayPal's total payment volume reached $15bn in the third quarter, eBay president and CEO John Donahoe said in the conference call. Its payment volume will soon exceed that of eBay's, with more than half of its transactions off eBay's site, he said.

This year, Bill Me Later's total payment volume should reach $1bn, the companies said in a presentation to investors.

The Danish classifieds sites, one linked to newspaper Den Blå Avis and one for automobile buyers, will bring eBay an additional 186 million monthly page views, the company said. It now owns classifieds sites covering 1,000 cities in 20 countries.

The two sites "give us technology we can use to improve our other classified sites", Donahoe said. Worldwide, eBay has more classifieds traffic and three to four times more classifieds revenue than the well-known classifieds site Craigslist, he said, adding that eBay also holds a stake in Craigslist.

Alongside these acquisitions, eBay said it will lay off 1,000 staff and several hundred temporary workers. The worldwide layoffs will allow the company to cut costs, it said, although they will result in restructuring charges of up to $80m in the fourth quarter.

"We have been very strategic about where these reductions will take place," said Donahoe. The cuts will save the company around $150m a year, he said.

eBay now expects to exceed its previously announced earnings expectations when it announces its third-quarter earnings on October 15, although revenue will be at the bottom end of the range it indicated in July.


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