EBay's profits skyrocket
Thursday, April 19, 2007 7:34 AM PDT
By Los Angeles Times
Printable version
E-mail this articleEBay Inc.'s profit and sales surged in the first quarter, tempering concerns that the online auction giant has been losing momentum.
EBay's PayPal online payments business, an easing in costs, a weak U.S. dollar and a lower tax rate helped push earnings up 52 percent, to $377.2 million, or 27 cents a share. Revenue climbed 27 percent, to $1.77 billion.
Analysts had expected revenue to be $1.72 billion. The company also said its Skype Internet telephone business recorded its first-ever quarterly profit.
EBay also raised its financial guidance, saying it expects 2007 revenue to be between $7 billion and $7.3 billion, or about $150 million higher than earlier projections. EBay also lifted its per-share earnings projections for 2007 by a nickel, to between $1.30 and $1.34.
But slower growth in eBay's auction business in the U.S. and Germany, two of its largest markets, has led some analysts to question the company's long-term growth.
"Their non-core businesses, things like advertising and Skype, really drove the business in the quarter," said Derek Brown, analyst with Cantor Fitzgerald. "But the fundamental buying of goods on the eBay site continues to face pressure. Buyers and sellers are clearly using alternative sites."
EBay's growth has lagged the past two years as it struggles with competition from Amazon, Craigslist, Google, Wal-Mart Stores Inc. and a host of private merchants with their own online stores.
EBay has responded by making some critical fixes to its auction system. It raised fees for items listed on its so-called storefront, where merchants sell products for fixed prices rather than auction them to the highest bidder.
Because fees were so low, sellers had flooded it with little-wanted items. The fee increase encouraged sellers to remove some low-ticket items and better promote the remaining ones, or to move them to the auctions section, which is more profitable for eBay.
The move, some analysts said, has helped put eBay back on track.
"They're now growing in areas where they can make more money," said Tim Boyd, analyst with American Technology Research, who expects eBay to grow its revenue at least on par with the growth overall online shopping. "They're now ahead of where they were when things started deteriorating for them in 2005, but their stock is half the price it was back then."
EBay shares, which lost 75 cents to $34.45, regained the lost ground and then some, adding as much as $1.12 to $35.57 in after-hours trading.
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