Internet pioneer eBay is cutting 2,400 jobs, 7% of the company’s global workforce.  The move comes as a tacit admission that the company has lost its continuing proxy battle with its largest stockholder, the activist investor Carl Icahn.  Icahn has been urging eBay to spin-off its profitable Paypal unit, and now eBay has entered into a “standstill” agreement with Icahn that will put an Icahn ally on the eBay Board of Directors, and will limit the defensive capability of the new Paypal unit by announcing that the entire Paypal Board of Directors will be elected annually by stockholders.

Another provision of the agreement between Icahn and eBay will allow anyone who holds up to 20% of Paypal’s shares (i.e. Icahn) to call a meeting to oust any of the company’s directors or to consider other proposals such as takeover offers.  In addition to spinning off its Paypal unit, eBay will now also spin-off its Enterprise division, the company’s warehouse and logistics unit.

According to The Wall St. Journal, investors were giddy at the news of eBay’s about face, and they quickly pushed up the price of eBay’s stock by 2% in the wake of the report.  While the changes announced by eBay might be good news for well-heeled investors, it is doubtful that any of the 2,400 employees who have lost their jobs have any shrines to Carl Icahn in their homes.

Ironically the changes announced by eBay came at a time when the company reported solid earnings with revenues up 10% over the same quarter a year ago.  Paypal contributed the most with its earnings up 18%, while the Enterprise unit’s total was up 9%.  Revenue at the core eBay unit grew only 1.3%, a low figure that eBay CEO John Donahoe attributed to a change in Google’s listings algorithm.

Icahn, who ten years ago attempted to take over Time Warner, and who nearly managed to ruin Marvel Comics in a takeover bid (see "Comic Wars--A Financial Book You Can Sell"), is expected to make Paypal the target of his next takeover.