eBay has said that it will fire 600 temporary and part-time workers and 1,000 full-time employees at its San Jose, California headquarters due to declining sales in its third-quarter forecast that are at the lowest level since 1998. 

On the heels of this announcement, eBay indicated that it would purchase online credit service, Bill Me Later for $945 million, and payment and classified advertising companies for $390 million, for a total of $1.34 billion.

Bill Me Later, the second largest online payment system, extends credit to customers and provides an option for deferred payments. PayPal, already owned by eBay, is the largest online payment system, and Bill Me Later will be merged into PayPal’s payment division. eBay also purchased Denmark’s Den Blaa Avis for its newspaper advertising and Denmark’s two largest classified advertising Websites.

eBay has been struggling to remain competitive with Amazon.com and has seen its shares decline 5.5 percent, even before the recent U.S. stock market meltdown. The job cuts are expected to save the company about $150 million annually. 

Amazon.com owns roughly 10 percent of Bill Me Later, so the acquisition by eBay is seen as a feather in eBay’s corporate cap. Analysts predicted the move as a favorable one. "EBay is largely a virtual business, and it doesn't have a lot of customer-service operations; it probably had too many people," said Jeffrey Lindsay, an analyst at Sanford C. Bernstein in New York. eBay purchase of  Bill Me Later "was a very astute move. It gives eBay access to parts of the transaction and fees that they don't normally get."

While the acquisition of Bill Me Later may be a good business move for eBay, the current credit crunch in the U.S. economy may make deal seen as risky and may not bode well for eBay. Unfortunately, the acquisition also means that U.S. workers will pay the price as their jobs are being leveraged to pay for the business expansion.