There was a time when PayPal was king of the online payment processors. It had its own MasterCard products for those who didn’t want to wait until transfers were made to their bank accounts, it was linked exclusively to online powerhouse eBay and it grew at a nice, albeit safe, clip to ensure its millions of global customers could rely on the service, safety and technology it offered. For quite some time – several years, in fact – it was the darling of the internet startup showcase. Now, though, it announced on Monday that it plans to cut 325 full-time jobs in what’s being called a “major shakeup of the organization”. And folks are placing it squarely at the doorsteps of its new president, David Marcus.
You may recall the excitement seven months ago when the new president was announced. Things were moving along at a steady pace and soon, PayPal members were enjoying a gorgeous new, easy to navigate website overhaul. The sun was shining down on the payments processing company. So what happened? Actually, if you’re thinking the company is in trouble – many do think that, by the way – you’d be wrong. It’s being described as a natural evolution. Marcus explained it this way,
PayPal is strong and performing well, but the layoffs are necessary to simplify the company. Moving forward, I’m confident these changes will make PayPal even better and stronger.
He then reiterated the commitment to its customers and also said they can expect faster innovation and greater products. it’s all about “…making their (customer’s) lives simpler. That’s our commitment – every day”.
Here’s what the company says will happen –
PayPal is cutting the 300 plus full-time jobs as part of a merge. Nine teams will be streamlined into one and the goal is to make PayPal a “more agile organization.” As this news broke, it was also announced it plans to shed another 120 contractors. The cuts are believed to be limited to the marketing and technology departments. In total, the company will shed 3 percent of its workforce. This will put its employment level at around 13,500 after the lay offs.
The intent is to simplify and speed up how products are developed. PayPal expects to continue…strong global growth momentum and leadership through online merchant expansion and…by driving payments innovation at point-of-sale retail for large, medium and small businesses…
reads a presser by the company. It also said it will turn a focus to online consumers and markets with “payments products and experiences that offer choice, flexibility and security”.
To date, PayPal boasts more than 117 million active registered accounts, which is indicative of a 14 percent increase from this time last year. Its revenue increased by nearly a quarter in a year’s time.
So what does this mean for eBay, its parent company? It will take a fourth quarter pre-tax charge of close to $15 million. Many had thought eBay’s third quarter earnings, which were quite impressive, would have staved off a layoff, but the pressers and company heads continue to insist neither company is in trouble, it’s just a business decision.
This decision begs the question, is increasing competition from Square and Google playing a role in the move?
If we don’t change, we simply won’t be able to sustain PayPal’s global leadership position over time. And we will not let that happen,
PayPal’s Marcus, wrote in a memo that was sent out to employees. It was obtained Monday by the AP.
To do this we need a simpler, streamlined place to work.
It was important the new president made it clear that those employees affected will be treated with fairness and dignity. He said that’s consistent with the culture and values of PayPal. He also said it had been a difficult decision,
These are good people, good friends…who have played a role in creating PayPal…
PayPal has managed to stay current with all of the newer methods of spending money, accepting money and linking our options to anyone else in the world. Its new credit card reader designed for smartphones is one of those successful efforts, as is its delayed payment options for those with strong credit scores and who wish to buy now and pay later.
It also recently teamed with Wal Mart to offer a prepaid debit card product. It’s already received high marks from financial bodies around the nation.
So what do you think about PayPal’s announcement? Is cutting four hundred jobs necessary to maintain its self-proclaimed successful place in the market or do you think Marcus has bitten off more than he can handle? Do you believe it’s a pro active approach or a reaction to tougher competition? Share your thoughts with us. Leave us a comment or join the discussion on Facebook or Twitter.