Paul Sakuma / AP An Ebay sign is shown at Ebay offices in San Jose, Calif., Wednesday, July 20, 2005. The San Jose-based company said Wednesday that it earned $291.6 million, or 21 cents per share, for the three months ended in June, a 53 percent increase from $190.4 million, or 14 cents per share at the same time last year. (AP Photo/Paul Sakuma)

Rumors of the eBay layoff that became official this morning have been circulating for weeks, but the added headlines of attempting to turn this company around by building on its strengths is quixotic at best.

The company will slash 1,000 jobs in what CEO John Donahoe calls on our air this morning "an opportunity to simplify our organization, to become a more nimble organization." On our air this morning, he uses words like "streamline," and "centralize" to get this company back on track. And alone, that would have been a good start to get this company's multiple, at a stunningly low 9 times next year's earnings, to climb again.

But the company also announces an $945 million acquisition of Bill Me Later, a transactional credit company that should augment its already humming-along PayPal service. eBay

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[EBAY  Loading...      ()   ] also announced another $390 million in other deals today. Interesting strategy and on its face, might make some sense.

The problem is that any positives eBay might enjoy from the workforce reduction are muted by the dilutive nature of the Bill Me Later deal. And eBay does the deal at a time when credit markets are a mess, and consumer spending is being curtailed because of all the economic uneasiness plaguing this country right now. Says Donahoe: "We like the counter-intuitive nature of this acquisition."

He might be the only one. eBay shares sank 7 percent on the news hitting a six year low; today's headlines only serving to shine a bright light on the company's uncertain core business. Part of today's news: For the third quarter, eBay says revenue will hit the low end of guidance, which was between $2.1 billion and $2.15 billion, but expects EPS to exceed its original guidance of 39 cents to 41 cents a share.

• Ebay Makes $1.3 Billion in Deals; Cuts Work Force
• Credit Crisis Spreads a Pall Over Silicon Valley
• Full of Doubts, US Shoppers Cut Spending

But analysts and insiders I'm talking to expressed deep concern about eBay's auction business, as the company continues to track a serious erosion in what built this brand to begin with. eBay is trying to hold onto its relevance even as Amazon

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[AMZN  Loading...      ()   ]and Google

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[GOOG  Loading...      ()   ]gain traction in the marketplace. That's a tough pill to swallow and a clarion call to CEO Donahoe that something creative needs to be done.

Seems like every quarter we talk about how great PayPal is doing. That deal was a stroke of genius by Donahoe's predecessor Meg Whitman, even though at the time all of us raised our eyebrows at what seemed like a high price. Looking back, it was a bargain. Same might someday be said about Bill Me Later, but not likely. One analyst I talked to this morning told me he liked the deal, that Bill Me Later "has a very good reputation. It should help boost (average selling prices) although they didn't need to buy it to get that benefit." He went on to tell me that "core business is still a concern."

Why? Today's deal merely builds on the obvious at the expense of eBay's core. Auction sales are slipping; new listings are flat; a small group of sellers seems to complain, and loudly, every few weeks about higher fees and declining business. And all of this today follows the big strategic shift in August that again, was hardly "thinking outside the box," but trying to turn eBay into an Amazon.com wannabe with its new listings and Buy-It-Now changes.

A layoff to streamline operations makes sense, hard as it is for all those employees and their families. But mix in a big-time, dilutive acquisition at the same time, and any turnaround eBay investors were hoping for now gets pushed out another several quarters. Don't believe me? Look at the eBay exit poll on Wall Street right now. As in, eBay investors running for the exits. A down market to be sure, but investors aren't happy with today's eBay news.

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