Ebay yesterday provided a cautious near-term outlook that reflected concern over a weak US economy and changes it has been making to its auction business, sending its shares down 7 per cent.
Investors, who have come to count on Ebay raising its outlook each quarter, were disappointed when the company said that revenue in the current quarter would be lower than expected, while leaving its full-year projections relatively unchanged.
It overshadowed a 22 per cent gain in second-quarter net profit that beat Wall Street estimates, helped by a surge in listings and share buybacks.
Average selling prices for Ebay fell in the second quarter due in part to more shoppers in the United States and Britain shifting to lower-priced goods, executives said.
The company has been lowering upfront listing fees to attract more sellers in response to slower growth in its main auction business over the past three years.
The tinkering with fees and efforts to improve trust between buyers and sellers are aimed at reviving growth amid competition from Amazon.com Inc and craigslist.com.
Second-quarter net income rose to $460 million, or 35 cents per share, from $376 million, or 27 cents a share, a year earlier. The company bought back 19 million shares worth $566 million in the quarter, helping to lift earnings per share.
Revenue rose 20 per cent to $2.2 billion, helped by a 27 per cent rise in international sales, while US sales grew by only 12 per cent. Analysts expected $2.17 billion, on average.
Excluding stock option expenses and merger-related costs, earnings were 43 cents per share, 2 cents above what analysts had expected on average.
John Donahoe, who took over as chief executive in April, highlighted strength at its payment service PayPal, where revenue grew 33 per cent to $602 million. At Ebay's web-based call service, Skype, revenue rose 51 per cent to $136 million.
For the third quarter, Ebay said it expects revenue of $2.10 billion to $2.15 billion, and adjusted earnings per share of 39 cents to 41 cents. Those were below average analyst projections of 41 cents per share on revenue of $2.17 billion.
For the full year, Ebay said adjusted earnings per share would be in line with the $1.74 expected by Wall Street.
The company expects 2008 revenue of $8.8 billion to $9.05 billion, up slightly from a range given in April of $8.7 billion to $9 billion. But that is on the low side of Wall Street estimates ranging from $8.9 billion to $9.24 billion.
Reuters