eBay 1st-qtr profit, revenue fall on weak economy but beat analyst expectations

eBay 1st-qtr profit, sales fall on weak economy

NEW YORK — EBay Inc. said Wednesday the weak economy led to lower earnings and revenue for the second consecutive quarter, but the online marketplace operator’s results still beat analysts’ expectations. The first-quarter numbers helped eBay shares shoot up 79 cents, or 5.4 percent, in after-hours trading, after they ended the regular session up 49 cents, or 3.4 percent, at $14.78.

The quarterly results, however, show the San Jose, Calif.-based company is still struggling, though — both with the recession and its efforts to improve its online marketplace.

EBay earned $357.1 million, or 28 cents per share, in the first quarter, down 22 percent from $459.7 million, or 34 cents per share, in the year-ago period.

When excluding items, eBay said it earned 39 cents per share. Analysts polled by Thomson Reuters expected 33 cents per share.

Revenue fell 8 percent to $2.02 billion, just above analysts expectations of $1.94 billion.

Revenue from eBay’s marketplaces segment — which includes eBay itself and e-commerce sites such as StubHub and Shopping.com — fell almost 18 percent to $1.22 billion. The company blamed the drop on the difficult economy and the strengthened dollar. EBay got about 54 percent of its marketplaces revenue from outside the United States, and deals done in other currencies translate into fewer dollars when the dollar is strong.

In an interview Wednesday, eBay Chief Executive John Donahoe said consumers spent less on fewer items during the period, buying a used item where they might have previously bought something new or a private-label shirt instead of a brand-name one.

“They hunted for that extra bargain,” he said.

In addition to grappling with economic headwinds, the company has been struggling to improve its marketplaces business and acknowledged in March it has a long way to go. EBay is focusing more on the market for offseason or liquidation goods and working harder to grow buyers’ trust.

For eBay’s payments segment, which is the second-largest business behind marketplaces and includes online payments service PayPal, revenue climbed nearly 11 percent to $643 million.

Revenue from eBay’s smallest business, Internet communications service Skype, rose 21 percent to $153.2 million.

As part of a move to focus on its marketplace and payments businesses, eBay is planning to separate Skype through an initial public offering in 2010. EBay bought Skype in 2005 for $2.6 billion but later wrote down much of its value, basically acknowledging that it had hugely overvalued it.

EBay’s number of active marketplace users grew 2 percent to 88.3 million in a sign of the company’s success in attracting new buyers and sellers.

But the company’s gross merchandise volume — a key metric that measures the value of everything sold on its site, except vehicles — fell 16 percent to $10.8 billion. This metric also declined in the previous quarter. Donahoe said the first-quarter decline reflects consumers buying fewer and cheaper items, and the dollar’s strength.

As in the previous quarter, 51 percent of the eBay’s gross merchandise volume came from auctions in the first three months of 2009. The remainder came from sale of products at fixed prices.

Donahoe said during the company’s conference call with analysts that two or three years from now, auctions could account for 30 percent or 40 percent of eBay’s gross merchandise volume.

Frederick Moran, an analyst with The Benchmark Company who rates eBay shares “hold,” said all three businesses did better than he expected.

“While the marketplace segment remains pressured, it wasn’t as severe as we thought, and that was a relief,” he said.

He said he had thought marketplace troubles could overflow and pull down PayPal’s growth, too, but PayPal “withstood that pressure completely,” he said.

For the current quarter ending in June, eBay expects a profit of 23 cents to 26 cents per share, or 34 cents to 36 cents per share when excluding items. The company is also expecting revenue of $1.85 billion to $2.05 billion. Analysts’ expectations were within that range — adjusted earnings of 35 cents per share on $1.98 billion in revenue.