PayPal, the online payment giant, announced on Tuesday that it has laid off 9% of its global workforce, affecting around 2,500 employees. The company said the move was part of a restructuring plan to streamline its operations and focus on its core business.
The layoffs come as PayPal faces increasing competition from rivals such as Stripe, Square, and Apple Pay, as well as regulatory challenges in some markets. PayPal also reported lower-than-expected earnings for the fourth quarter of 2020, with revenue of $6.12 billion and earnings per share of $0.86, missing analysts’ estimates of $6.17 billion and $0.88, respectively.
PayPal CEO Dan Schulman said in a statement that the company is “making significant changes to position PayPal for future growth and success”. He added that the company is “grateful for the contributions of the impacted employees and will support them through this transition”.
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PayPal said it expects to incur pre-tax restructuring charges of approximately $70 million in the first quarter of 2021, related to severance and other employee-related costs. The company also said it expects to save about $300 million annually from the layoffs.
PayPal has more than 28,000 employees worldwide and serves over 375 million customers and merchants in more than 200 markets. The company said it will continue to invest in new products and services, such as cryptocurrency, buy now pay later, and QR code payments, to enhance its value proposition and drive growth.
The decision came as a shock to many PayPal workers, who were notified of their termination via email or phone calls. Some of them took to social media to express their anger and frustration, while others shared their stories of working at PayPal and thanked their colleagues for their support.
Many customers also reacted to the news, with some expressing sympathy for the laid-off workers and others questioning how the layoffs will affect the quality and security of PayPal’s services.
PayPal CEO Dan Schulman said in a statement that the layoffs are necessary to “align our resources with our long-term strategic vision” and to “create a more agile and efficient organization”. He added that the company will provide “generous” severance packages and outplacement services to the affected employees, and that it will continue to invest in its core businesses and growth opportunities.
However, some analysts and industry experts are skeptical about the rationale and impact of PayPal’s move. They argue that the company is facing increasing competition from rivals such as Stripe, Square, Venmo, and Apple Pay, and that it needs to innovate and improve its customer experience rather than cut its workforce.
They also point out that PayPal has been profitable for years, and that it generated $6.1 billion in revenue and $1.2 billion in net income in the third quarter of 2023.
Some critics also accuse PayPal of being insensitive and irresponsible in handling the layoffs, especially amid the ongoing Covid-19 pandemic and the economic downturn. They say that the company should have communicated better with its employees and customers, and that it should have explored other alternatives to reduce costs, such as voluntary buyouts, salary cuts, or furloughs.
PayPal’s stock price dropped by 4% after the announcement, reflecting the negative sentiment among investors and analysts. The company is expected to face more challenges and scrutiny in the coming months, as it tries to execute its restructuring plan and maintain its market position.