|
EBay swings to profit as auction business slows
Online auction firm offers disappointing forecast, sending shares lower
By Dan Gallagher, MarketWatch
Last Update: 5:19 PM ET Oct 15, 2008
SAN FRANCISCO (MarketWatch) -- EBay Inc. swung to a profit in the third quarter following a massive write-off of its Skype acquisition last year, but the company's core online auction business continued to show signs of slowing.
The company also issued a disappointing forecast for the year-end period, pushing the already battered shares down more than 7% in after-hours trading Wednesday.
The results indicate that eBay EBAY is feeling the heat from the slowing economy while it continues to grapple with a large-scale restructuring effort designed to improve its core business and reduce its costs.
"We are in an economic period that we haven't faced in decades," said Scott Devitt of Stifel Nicolaus. "I think this is an indication of more to come for consumer-facing businesses."
For the third quarter, eBay reported net income of $492 million, or 38 cents a share, compared with a loss of $936 million, or 69 cents a share, for the same period last year. Results for the previous third quarter were affected by a charge of nearly $1.4 billion related to the write-off of goodwill from the 2005 acquisition of Internet telephony provider Skype.
Excluding charges related to stock options and other items, the company said it would have earned $592 million, or 46 cents a share, for the recent period.
Revenue grew 12% to $2.12 billion.
Analysts were expecting revenue of $2.14 billion and earnings excluding certain charges of 41 cents a share, according to consensus forecasts from FactSet Research.
Earlier this year, eBay began a restructuring effort designed to improve the buying and selling experience on its Web site. This included changes to clean up older listings and offer more items on a fixed-price basis, which has become a popular draw for competitors such as Amazon.com AMZN.
But so far, the changes do not seem to have boosted the core business. The company said gross merchandise volume -- the value of all goods sold over its auctions Web site -- slipped by 1% during the quarter. GMV had grown by 14% in the previous third quarter.
"Clearly, GMV in the third quarter was not what we would have liked," eBay CEO John Donahoe said during a conference call. "But we remain confident in our overall direction and believe we are on the right path."
A brighter spot was the company's PayPal unit, which saw revenue jump 27% to $597 million for the quarter. Skype revenues grew 46% from the same period last year to $143 million.
For the fourth quarter, eBay predicted earnings of 39 cents to 41 cents a share, excluding charges, with revenue expected to come in between $2.02 billion and $2.17 billion. Analysts had been looking for earnings of 48 cents a share on revenue of $2.42 billion, according to FactSet estimates.
|