EBay posts higher Q2 sales and earnings

By Andrea Orr

PALO ALTO,California: The popular online auction company eBay Inc. reported its quarterly earnings more than doubled, as more people turned to its site to purchase a host of items from cars to computer equipment, clothing and vitamins.

"A few quarters ago it was not entirely clear what the impact of the economic slowdown would be on our business," Chief Financial Officer Rajiv Dutta said in an interview shortly after earnings were announced.

"Now, with a few quarters under our belt, we can say that it certainly hasn't hurt our business."

EBay reported net income of $54.3 million or 19 cents per share, more than double the $24.6 million or nine cents per share earned in the year-earlier quarter, and it said it has seen virtually no impact from the tough economy.

EBay, one of the few dot-coms that is not just still standing, but actually enjoying strong profit growth, said its revenues rose to $266.3 million from $180.9 million.

The results provided little surprise, since eBay had pre-announced earnings earlier this month when it said it agreed to acquire the online payment services company, PayPal Inc., for $1.5 billion in stock. A large number of eBay members use PayPal to transfer cash when they buy items on the site and the acquisition will help eBay capture another fee from online auctions.

Shares dip but remain strong

Still, eBay's stock fell after the second quarter numbers were released as some investors took note of the company's conservative guidance for future results, which was virtually unchanged from its earlier estimates.

Shares of San Jose, California-based eBay, which had closed the regular trading session down $1.17 to $60.45 per share, slipped to $59.20 in after-hours activity following the release of earnings.

"I thought the guidance was a bit disappointing," said U.S. Bancorp Piper Jaffray analyst Safa Rashtchy."I think it shows that the company's rate of growth is slowing. It is still a great company, but the element of (upside) surprise is gone and that will put the stock price under pressure since investors pay a premium for that upside."

EBay said it continues to expect it will report full year revenues of $1.1 billion this year and $3 billion in 2005, excluding the acquisition of PayPal. Some other analysts argued that eBay's growth remained robust but that the company has traditionally been conservative with guidance. To offer a sense of the rate at which eBay continues to expand, the company said it hosted 145.2 million auction listings during the quarter, up 47 percent from a year ago.

Gross merchandise sales, or the value of all goods sold on its site, totaled $3.4 billion, up 51 percent over the year. EBay also said it expected to report revenues of $278 million to $281 million in the third quarter, which was slightly below the average Wall Street estimate of $283 million, as surveyed by Thomson First Call.

It forecast pro forma earnings per share of about 19 cents in the third quarter and between 76 cents and 78 cents for the full year, both of which are in line with analyst estimates. Even with the minor sell-off in eBay shares, the stock remains one of the best performers in the Internet sector. Year to date it is down 7.9 percent, compared with a 19.6 percent decline in shares of Yahoo! Inc. and a 16.2 percent decline in Wal-Mart Stores Inc., the largest U.S. retailer, to which eBay is increasingly being compared.

© Reuters