Print

Mail

wiki links

eBay reports 30% growth in Q3 sales to US$1.89bn

"I think we have improved the product this year ... We've done work in customer support, trust and safety and different pricing scenarios, which we continue to test."

Meg Whitman, chief executive of eBay

EBay, the e-commerce company, said it continued to grow quickly in the last quarter -- with a few stutters related to its slowing core business of Internet auctions.

In its third-quarter earnings report on Wednesday, eBay reported sales of US$1.89 billion, up 30 percent from last year and ahead of Wall Street's forecast of US$1.83 billion.

One blemish on the results: The company reported a US$936 million net loss because of a recent write-off stemming from its pro-blems making money from Skype, the Internet calling service it acquired in 2005.

Excluding one-time items like the Skype write-down, the company had US$564 million in profit, up 53 percent from US$367 million in the third quarter last year.

"I would say it was a strong quarter," Meg Whitman, chief executive of eBay, said in an interview. "The strength came from eBay International, PayPal merchant services, ticketing site StubHub, classifieds and advertising, which all performed above expectations."

Whitman omitted eBay's auction business in the US from that list.

Analysts have been closely watching it for signs that its growth is slowing, and in eBay's latest report, it indeed showed further signs of stagnation. Gross merchandising volume, the total amount of economic activity on eBay, was up 14 percent over last year, but that growth rate declined from 17 percent last year.

The number of active users on eBay, 83 million, was unchanged from last quarter, and the number of auction listings was down 5 percent from last year, a trend that the company is trying to reverse by making the site more fun to use and by being more responsive to problems.

"I think we have improved the product this year," Whitman said. "We've done work in customer support, trust and safety and different pricing scenarios, which we continue to test."

"I don't think there is a silver bullet, but we are doing all the right things," she said.

Despite the mixed message on auctions, investors increasingly have other things on their minds when evaluating eBay, which is based in San Jose, California. PayPal, the online payment company, reported US$470 million in sales this quarter, a 35 percent increase from last year. PayPal accounts for a quarter of eBay's revenue.

"This is the most interesting side of the story right now," said Scott Devitt, managing director for Internet consumer services at Stifel, Nicolaus & Co.

Devitt pointed to PayPal's initial successes in positioning itself as an alternative to credit cards outside the world of eBay, such as on the Web sites of major airlines.

"The big opportunity here is to disrupt credit cards over time. These are huge opportunities that PayPal is pursuing," he said.

Analysts like Devitt have urged eBay to consider selling PayPal shares to the public. Whitman said the company had no plans to do so.

This fall, investors have rallied behind eBay, propelling the stock up 18 percent since the beginning of last month, in the belief that PayPal was growing quickly and that the company was finally stabilizing its core auctions business.

In after-hours trading eBay's stock was up US$0.15 to US$40.75 on Wednesday.

The net loss for the quarter resulted from a decision that was announced earlier this month, to write off US$1.43 billion in value for Skype, for which it has conceded it drastically overpaid. Part of that write-off canceled a further incentive-based payout, called an "earnout," to Skype investors that the companies had negotiated during their original deal.

Whitman spoke about the Skype write-off for the first time.

"It was disappointing, and we were sorry that it was necessary," she said. "But I think we are in better shape. The earnout was definitely getting in the way of running Skype the way we wanted to run it. Now that the earnout is out of the way and we have taken the write-down, we have the opportunity to have a new day at Skype."
This story has been viewed 1160 times.