eBay, Inc. (EBAY) Net Income Decreases as Revenue Increases

on October 22 2009 3:33 AM

eBay Inc. reported that its net income was down 29 percent on a year-over-year basis with revenues up significantly. EBay’s core marketplace business, such as the eBay site, Shopping.com and others, saw revenue dip 1 percent to $1.4 billion. Companywide Revenues increased 6 percent to $2.24 billion.

The company cited a combination of main site activity, foreign exchange differences and a continued soft consumer market as recent factors in the company’s financial results. eBay said that the number of active users on its core marketplace rose 2 percent to 89.2 million which demonstrated that it continues to attract merchants and users. Gross merchandise volume – a metric that indicates the value of all the items sold on eBay, excluding vehicles, increased 7 percent to $12.2 billion

Growth from the company’s PayPal and Skype subsidiaries helped offset a tough environment for core areas of the business. eBay’s PayPal subsidiary, which includes short-term credit service Bill Me Later, represented a bright spot for the company with active PayPal accounts up 19 percent to 78 million and a 15% revenue increase to $688 million for its payments business vs. last year’s results. Revenue from Internet communications service Skype, which is eBay’s smallest business, increased 29 percent to $185.2 million.

The company’s net income decrease was primarily driven by higher operating expenses. eBay reported earnings of $350 million, or 27 cents per share vs. net income of $492 million, or 38 cents per share, in the year-ago quarter.

eBay is planning to sell a majority stake in Skype to a group of private investment funds for $1.9 billion in cash with a later payment of $125 million. eBay plans to keep the other 35 percent. A copyright infringement suit over the use of technology that Skype licenses from another company founded by Skype’s creators could complicate the sale.

For the upcoming December quarter, eBay expects to earn 28 to 30 cents per share, or 38 cents to 40 cents per share when excluding one-time items. The company is looking for revenue in the $2.2 billion to $2.3 billion range.

Analysts estimates are in the 40 cent range for adjusted eps on $2.26 billion in revenue.
Share prices in eBay declined $1.31, or just over 5 percent, in after-hours trading yesterday.