Tags: ebay | profits | drop

Ebay's Profit Falls 31 Percent

Wednesday, 21 Jan 2009 09:29 PM

NEW YORK — EBay Inc.'s fourth-quarter earnings fell 31 percent, indicating that its Internet auctions and "Buy It Now" offerings are being hurt by the recession just like traditional retail sales.

The results, combined with a forecast below analysts' expectations, sent eBay shares skidding more than 6 percent in after-hours trading.

San Jose, Calif.-based eBay said Wednesday it earned $367 million, or 29 cents per share, in the quarter. That was down from $531 million, or 39 cents per share, in the year-ago quarter.

Excluding one-time items in the most recent period, eBay earned 41 cents per share — 2 cents higher than the prediction of analysts polled by Thomson Reuters.

Revenue fell 6 percent to $2.04 billion, missing analysts' expectations for $2.12 billion. The company said the decline stemmed mostly from the recession and the strengthening of the dollar. Deals done in other currencies now translate into fewer dollars.

In an interview, Chief Executive John Donahoe said the company knew it would be a difficult fourth quarter, as consumers held on to their money. "They wanted to make sure every dollar counted," he said.

Among other issues, there was also no gotta-have-it gift item during this holiday season, unlike previous years. Donahoe said EBay often benefits from the scarcity of such products by becoming one of the few places shoppers can still buy them.

Sales from eBay's marketplace segment — which includes eBay, Shopping.com, StubHub and other e-commerce sites — fell 15 percent to $1.27 billion.

In the company's PayPal unit, which handles online payments for eBay and other sites, revenue climbed almost 11 percent to $623 million.

The company's number of active users — an important measure of how well eBay is attracting new buyers and sellers — rose almost 4 percent to 86.3 million.

Yet eBay's gross merchandise volume — the total amount of money that flows from transactions on the site, excluding those involving vehicles — sank 12 percent to $11.5 billion. This marked the second quarter in a row in which this metric has declined. Until last year it had never happened to eBay at all.

A bit more than half of eBay's fourth-quarter gross merchandise volume — 51 percent — came from auctions; the other 49 percent came from sales of fixed-price items, which have been steadily rising and made up 46 percent of the company's gross merchandise volume in the third quarter. Donahoe said the shift "reflects the ongoing evolution of eBay."

Cowen and Co. analyst Jim Friedland said he was looking for a lot of negative things going into the fourth quarter. "When we looked at the results, there was really nothing that stood out that was either more negative or, on the flip side, there wasn't anything that was more positive," he said.

For the full year, eBay earned $1.78 billion, or $1.36 per share. Revenue totaled $8.54 billion.

Looking ahead, eBay expects first-quarter earnings of 21 cents to 23 cents per share, or 32 cents to 34 cents when excluding one-time items. The company forecast revenue of $1.8 billion to $2.05 billion for the period.

Analysts were expecting adjusted earnings of 40 cents per share on $2.1 billion in revenue in the current quarter.

"The macroeconomic environment will continue to be extremely challenging in 2009 and we planned conservatively," Donahoe said during a quarterly conference call with analysts.

EBay shares fell 86 cents, or 6.5 percent, in after-hours trading. Before the earnings report they finished regular trading up 73 cents, or 5.8 percent, at $13.28.

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