San Jose (CA) – Ebay responds to the economic downturn with layoffs and two big acquisitions. The company also announced the purchase of Bill Me Later for about $945 million and Denmark's leading online classifieds site and vehicles site bilbasen.dk for approximately $390 million.

The online auction business said that it will initiate a global reduction of its workforce to “streamline” the core business and improve its cost structure and competitiveness. The firm said it will cut about 10% of its staff, affecting about 1000 full-time employees and “several hundred” temporary workers. The company also addresses potential growth areas and will spend more than $1.3 billion to acquire three businesses.  

A key purchase is Bill Me Later, which offers a new payment option in which an aggregated bill for all purchased items within a billing period is mailed. Ebay expects to close the deal worth $820 million in cash and $125 million in options in Q4 and merge the company with its own PayPal unit. The company noted that the acquisition will reduce operating earnings per share by 3 cents in Q4 and by 6 cents in 2009. The company hopes adding Bill Me Later as an alternative payment option could bring new buyers to the site that could generate an additional $150 million in revenue in 2009.

The company also acquired the Denmark's leading online classifieds site dba.dk and vehicles site bilbasen.dk for approximately $390 million in cash.

According to a press release, Ebay expects to report Q3 revenue of about $2.1 billion, which is at the lower end of its previously provided guidance. The news prompted Wall Street to send shares down 8% to $17.47, an all-time low in more than five years.

It is Ebay’s first major layoff move that has been anticipated for several weeks. However, it is interesting to note that the company has a tradition to acquire new business in shaky times. For example, PayPal was purchased for $1.5 billion in 2002 - when the dotcom bust was still not over. However, industry sources suggest that the Skype business as well as StumbleUpon are up for sale.