EBay cutting 1,600 jobs, 10 percent of work force

Donahoe did acknowledge that the weak economy and the effects of the strengthening dollar are hurting eBay's business. Third-quarter revenue will be at the low end of the company's expectations. Nonetheless, eBay said its third-quarter earnings would be higher than it had predicted in July.

EBay's shares fell $1.05, 5.5 percent, to $17.89. The shares have lost about half their value this year.

EBay also said Monday that it will purchase Bill Me Later, a privately held company that lets online retailers give shoppers credit without detailed application forms, for about $820 million in cash and $125 million in outstanding options. The Timonium, Md.-based company is expected to become part of PayPal by the end of the year. Shoppers should be able to use the Bill Me Later service on eBay's sites in the second half of 2009, PayPal President Scott Thompson said in an interview.

EBay might see the purchase as a way to get consumers to buy more-expensive items through the site. Thompson noted that people using Bill Me Later tend to spend more on online retail sites.

"I think they're taking advantage of a good opportunity at this time," said Weinstein, the analyst. "It should help them do well in the payment business in the future."

EBay also said Monday that it purchased Danish classified-ad site dba.dk and vehicles site bilbasen.dk for about $390 million in cash. The sites add to eBay's stable of classifieds sites, which include Kijiji and Gumtree.

Donahoe said eBay went after Bill Me Later and the Danish sites now because it is "a good time for smart investors that focus on the long term to move."

"In times like this," he said, "strong companies have a potential to get stronger."