EBay Inc's fourth-quarter earnings inched past Wall Street estimates on Wednesday as the online auction giant reported strong holiday sales and boosted its already optimistic outlook for the year.
For the three months ended Dec. 31, eBay earned US$142.5 million, or US$0.21 per share, compared to US$87 million, or US$0.14 per share, in the same period of 2002.
Excluding special items, eBay earned a record US$157 million, or US$0.24 per share, compared to US$87.6 million, or US$0.14 per share in the last quarter of 2002.
Analysts were expecting eBay to earn US$0.22 per share, according to a survey by Thomson First Call.
Fourth-quarter revenue was US$648.4 million, up 57 percent from US$413.9 million in the same period of 2002.
Chief financial officer Rajiv Dutta credited the fourth-quarter surge to strong holiday sales and the growing popularity of eBay's fixed-price merchandise and one-day auctions. EBay was the top e-commerce site last month, he said.
He praised thousands of eBay sellers, who peddle wares ranging from Pez dispensers to million-dollar computer servers, for making San Jose, California-based eBay a rare exception to the dotcom collapse that devastated the stock prices of other e-commerce companies.
"EBay is really an army of entrepreneurs -- an adaptive marketplace in good times and bad," Dutta said in a telephone interview Wednesday. "Our entrepreneurs constantly look for what works, what succeeds. They're always one step ahead of us, and that's the magic of eBay."
For the entire year, eBay earned US$441.8 million, or US$0.67 per share, up 77 percent from 2002 earnings. EBay's revenue last year was US$2.17 billion, up 78 percent from 2002.
EBay received an unexpected boost from the relatively weak dollar and strength of foreign currencies, particularly the euro. Favorable exchange rates accounted for about US$10 million in added revenue in the fourth quarter, and US$26.7 million throughout last year, Dutta said.
Dutta boosted the company's guidance to Wall Street analysts for this year. EBay expects annual revenue of at least US$3 billion, about US$100 million more than executives were predicting several months ago. EBay boosted its estimate for this year's earnings from US$0.98 to US$1.04 per share.
Although chief executive Meg Whitman said in a conference call Wednesday that 9-year-old eBay was growing faster than Microsoft, Dell or Wal-Mart Stores Inc when those companies were young, eBay appears to be taking on the added costs and legal burdens of established companies.
EBay spent US$96 million on "general and administrative" expenses in the fourth quarter of last year, up 52 percent from the US$63.3 million it spent in the same period of 2002. Dutta blamed the spike on legal expenses but would not elaborate on whether the company had settled long-simmering patent infringement and other lawsuits, or whether the extra expenses were recurring or one-time costs.
"We resolved several long-standing legal matters related to PayPal," Dutta said of eBay's lucrative payment processing subsidiary. "Companies, particularly those perceived to have deep pockets, are often the subject of litigation."
Analysts praised the company's rocketing growth, but some questioned how long eBay could continue its lightning pace. In particular, the reputation of eBay, which will boost spending on domestic marketing this year, could weaken if it doesn't work to eliminate fraudulent transactions, said Gene Alvarez a Meta Group technology analyst and vice president.
Although less than one-tenth of 1 percent of transactions are fraudulent, according to company estimates, fraud strikes disproportionately high-priced items such as computers and automobiles. Some customers have lost tens of thousands of dollars.
"Fraud protection is crucial for survival," Alvarez said. "If eBay is creating an environment that is not safe for e-commerce, people will leave. It's like shopping in a bad neighborhood -- people just don't want to do it, and they have plenty of options."
Ebay shares lost US$1.32 to close at US$64.38 on the NASDAQ Stock Market before the earnings were released. They gained US$2.62, or 4 percent, in the extended session.
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