EBay results outdo analyst expectations
EBay reported financial results Wednesday that exceeded analysts' expectations and reassured investors that it is rebuilding its business after a misstep earlier this year.
EBay's quarterly profit rose 10 percent to $281 million on revenues of $1.45 billion. Excluding the cost of employee stock options and other expenses, eBay said it earned 26 cents per share, 2 cents more than analysts had been expecting.
Chief Executive Officer Meg Whitman said the company had a very good quarter and she was ``cautiously optimistic'' that an attempt to strike the right balance between listings in online auctions and online stores was working.
EBay dramatically expanded the number of items for sale at fixed prices earlier this year. But the move alienated buyers, who were overwhelmed by identical items at unattractive prices. The move also stoked concerns about the long-term health of eBay's core marketplace business.
Since January, eBay's stock has fallen more than 50 percent, from a high of $47.86 to a low of $22.83 in early August.
Later in August, eBay responded to the problems by increasing some of the fees it charges sellers with online stores with the goal of encouraging them to participate on its auctions marketplace.
``The key take-away by far is the fee change on Aug. 22 appears to be working a little better than most people expected,'' said John Aiken, an analyst with Majestic Research, after listening to eBay's executives discuss the company's results.
``Despite some bumps, 2006 is exactly the evolutionary year we thought it would be,'' Whitman said, noting that PayPal's sales had grown 41 percent and Skype was now being used by 136 million people around the world.
EBay's stock rose about 2 percent in after-hours trading following the earnings release. Earlier in the day it had closed at $28.49, down 1 percent.
Chief Financial Officer Bob Swan said in an interview that he is hoping the changes will lead to a re-acceleration of growth.
Swan increased eBay's earnings forecast for 2006 to between 75 cents and 76 cents per share on revenues ranging from $5.87 billion to $5.93 billion, though the forecast was still less than some analysts had been expecting.
On a conference call with analysts, Whitman indicated the company would not be pulling out of China, quashing rumors that it was in talks to sell EachNet, its China operation.
Whitman said it is harder to make money from the Chinese marketplace but that eBay is ``maintaining share in a competitive environment.''
EBay also reported it was close to completing a $2 billion stock buyback program it had announced in June. Swan said the company had moved aggressively because it believed its shares were undervalued.
Whitman gave an update on agreements eBay made with Google and Yahoo to allow the Internet advertising giants to display ads on eBay sites.
Whitman said some of Yahoo's display advertising had run on eBay Motors. And she said Google was already selling text-based ads on a classified advertising site that eBay owns in Germany. Ebay has classified sites operating in 400 cities around the world, and it is hoping to make money from those sites by selling ads from Yahoo in the United States and ads from Google outside the United States.