PayPal to cut about 325 jobs in major reorganization

SAN FRANCISCO, Mon Oct 29, 2012 – PayPal is cutting about 325 jobs as part of a major reorganization by its new president, David Marcus, designed to regain an innovative edge and head off rising competition.

PayPal, the online payment pioneer owned by eBay Inc., said on Monday the full-time jobs would be eliminated as it combines nine product-development groups into one. The company is also cutting about 120 contractors.

EBay announced a $15 million pre-tax restructuring charge, to be recorded in its fourth quarter, related to the job reductions.

PayPal, which started in the late 1990s as a scrappy Silicon Valley start-up, had almost 13,000 employees earlier this year.

“In a large company, at some point you reach the law of diminishing returns when more people means slower,” said Marcus, who used to run mobile payments start-up Zong, which PayPal acquired last year.

“You have a lot of duplication of roles with nine product groups merging into one,” he said.

Wall Street considers PayPal the crown jewel of eBay because it is growing fast and profit margins are expanding. But in Silicon Valley, PayPal is considered a slow, bureaucratic behemoth – a reputation that has made it difficult for the company to attract and retain smart software engineers and designers.

PayPal needs such talent more than ever because a slew of payments start-ups, including Square, Stripe and Dwolla, are developing rival services and products that are beginning to catch on with merchants and consumers.

“PayPal has been on a very strong growth trajectory, but it’s facing a period of disruption ahead,” said Kevin Hartz, chief executive of ticketing start-up Eventbrite.

“We just haven’t seen a lot of innovation that’s needed for them to continue their leadership,” added Hartz, who was an early investor in PayPal and owns a small stake in Square now.

Marcus said he is reorganizing PayPal to help engineers and designers develop new products and services more quickly, to keep up with new rivals.

PayPal eyes 7 million retail locations in Discover deal

SAN FRANCISCO, Wed Aug 22, 2012 – Online payments provider PayPal will gain access to millions of physical stores in the United States under an agreement with Discover Financial Services.

Under the deal, unveiled on Wednesday, PayPal will issue payment cards to its more than 50 million active users in the United States next year.

The cards will let PayPal users buy from merchants that already use Discover Network, a payment network with more than 7 million U.S. retail locations.

PayPal, a unit of eBay Inc., is expanding into the physical world, in search of new opportunities. In the past year, the company has signed up more than 15 retailers, including Home Depot and Office Depot, to accept PayPal payments in their stores.

Adding PayPal to Discover’s network is a big boost for the initiative, according to Ken Paterson, a director at Mercator Advisory Group, a research firm that focuses on the consumer payments industry.

“It’s a big step for both companies,” Paterson said. “This would provide a ready-made route for PayPal to get into most card-accepting retail establishments in the U.S.”

For Discover, PayPal’s large user base could become a significant source of extra transaction volume for its payment network, he added.

PayPal users will be able to pay at merchants on the Discover Network by swiping their new cards through existing check-out machines and entering a four-digit PIN, the companies said.