EBay beats and raises, sees improved holiday

SAN FRANCISCO, USA: EBay Inc posted a better-than-expected quarterly profit and forecast stronger holiday earnings as the Internet commerce company enjoys robust growth at PayPal while striving to reinvigorate its main marketplaces unit.

The company also raised its full-year revenue and profit forecast and its shares rose 7.3 per cent in after-hours trading.

EBay, which began as an online auction house, but sees most of its sales at fixed prices, is in the latter half of a three-year turnaround focused on its marketplaces unit.

The company competes with Amazon.com Inc and a host of e-commerce retailers, all of whom are hoping to appeal to cost-conscious shoppers still pressured by high unemployment and a sluggish US economy.

The company, which also owns PayPal, expects fourth-quarter revenue of $2.39 billion to $2.49 billion, with adjusted earnings per share of 45 cents to 48 cents.

That is above the 44 cents per share on revenue of $2.4 billion that analysts have been expecting, according to Thomson Reuters I/B/E/S.

"This is good across all their businesses," said UBS analyst Brian Pitz, adding the results and forecast would improve lukewarm investor sentiment toward eBay. "They're starting to see traction with marketplaces and they expect pretty decent results in the fourth quarter."

For the full year, eBay expects revenues to range between $9.05 billion to $9.15 billion on adjusted earnings of $1.67 to $1.70 per share.

That was above an earlier revenue range of $8.8 billion to $9.0 billion on adjusted earnings per share of $1.60 to $1.65.

"With our U.S. business stabilized, we are making the adjustments necessary to capitalize on the pricing and search changes made earlier this year and we are continuing to innovate around the user experience," Chief Executive John Donahoe told analysts on a call.

EBay has tried to simplify its process for listing items and lowered upfront fees to encourage more sellers, while focusing on safety measures to protect buyers.

Chief Financial Officer Bob Swan said the marketplaces division should have a "strong performance" in Europe and a "stable performance" in the United States over the holiday season.

The November and December holiday season is a key selling period for e-commerce players and their brick-and-mortar rivals. Market research firm comScore said last week that holiday online spending could rise between 7 per cent and 9 per cent this season.

Investors are awaiting a holiday forecast from Amazon.com when it reports third-quarter results on Thursday. Amazon is generally expected to dominate e-commerce holiday sales as it fosters shopper loyalty and cuts prices.

Analysts, on average, expect Amazon to post a 36 per cent gain in 2010 revenue, compared with the 5 per cent eBay expects at its high end.

Amazon shares are up 67 per cent from a year ago as of Wednesday's Nasdaq close, compared with a 2.4 per cent rise at eBay.

Stable marketplace

EBay's third-quarter net profit was $431.9 million, or 33 cents per share, from $350 million, or 27 cents per share, a year earlier.

Excluding Web telephone unit Skype, which the company sold, earnings were 40 cents per share, above the 37 cents that analysts were expecting, according to Thomson Reuters I/B/E/S.

Revenue rose 1 per cent to $2.25 billion, above the $2.18 billion that analysts expected. Revenue in the marketplaces segment rose 3 per cent to $1.41 billion, while revenue in payments, which includes PayPal, rose 22 per cent.

Gross merchandise volume excluding vehicles -- which measures the total value of goods sold on eBay -- rose 3 per cent in the quarter.

The company's shares rose to $27.54 after closing at $25.66 on the Nasdaq.