Source: Groupon.  

Groupon (GRPN 0.32%) is getting smaller. Shares of the leading group-buying website operator slipped 2% yesterday after announcing layoffs that are part of an international retreat. 

Groupon's dreams of global domination have been scaled back in recent months. It sold its controlling stake in Ticket Monster -- a South Korean e-commerce business -- in May. It bowed out of Greece and Turkey. On Tuesday it revealed that it's also exiting the once promising markets of Morocco, Panama, the Philippines, Puerto Rico, Taiwan, Thailand, and Uruguay.

It's like a board game of Risk gone horribly wrong, but it's also about eliminating the real risks that come from spreading a company's efforts too thin. 

The 1,100 jobs being eliminated may represent 10% of the Groupon global workforce, but we're also talking about jobs in its international Deal Factory and Customer Service that may not be as necessary now that Groupon is less of a worldwide force. Groupon will take a pre-tax charge of up to $35 million to cover severance payments and exit costs, but future savings will be reinvested in Groupon's continuing operations. 

Investors typically applaud layoff announcements. It's cruel, but Mr. Market often sends a stock higher on the news under the assumption that a struggling company has a better shot at succeeding if it can focus on what's working. That didn't happen to Groupon's stock yesterday, just as it's trading more than a third lower than where it was back in May when it announced the sale of Ticket Monster. 

Folks are bailing on Groupon, and bears are getting hungrier. There were nearly 89 million shares of Groupon sold short as of mid-August, the highest level of short interest on the stock since late last year. 

It's hard to believe that this was a market darling just before it went public at $20 four years ago. It has gone on to shed nearly 80% of its value. 

The delicious twist here is that Groupon is in surprisingly decent shape for a company where bulls are bailing and bears are charging. Revenue has more than doubled since its IPO, and while profitability was rare in its early years it has posted positive adjusted earnings in two of the past three quarters. Business was stagnant until Groupon made the push to add physical products to its prepaid local experience vouchers, but it's making better connections these days. Gross billings in North America posted a 12% year-over-year pop in its latest quarter.

Groupon is far from perfect, of course. It has failed to live up to the initial promise of the chunky margins waiting to be scored by splitting the proceeds of prepaid vouchers with local merchants and service providers. However, with sentiment clearly bearish at a time when the former dot-com darling is growing and making moves to improve its focus it's hard to join the herd that's moving on when Groupon itself is moving on.