eBay sales up 24%, but user growth is weak

April 16, 2008, 8:36 PM UTC

By Michal Lev-Ram

Online auctioneer eBay reported first-quarter earnings that beat analysts’ estimates Wednesday, citing strong growth in classified listings, expansion at PayPal and Skype and the company’s global business.

The San Jose, Calif.-based company said revenues rose 24% to $2.19 billion, up from $1.8 billion in the same period last year, and beating Wall Street’s expectations of $2.08 billion.

eBay’s (EBAY) net income came in at $460 million, or 34 cents a share, in the first quarter, up 22% from a year ago. Excluding certain one-time charges, profits rose to $562 million, or 42 cents a share, above analysts’ consensus estimates of 39 cents per share.

This was a very strong financial quarter for the company, said new eBay chief executive John Donahoe, who took over in March after longtime CEO Meg Whitman stepped down. The results reflect the strength provided by our diverse portfolio of businesses.”

Shares of eBay were largely unchanged after-hours. The stock finished the day up nearly 2% in regular trading on the Nasdaq.

“It was a case of they beat the numbers but it was anticipated,” said Piper Jaffray analyst Aaron Kessler.

Last January, eBay’s stock took a hit after its guidance fell below Wall Street’s estimates. And in February, eBay outraged some sellers when it reduced listing fees but increased the amount of money it takes out of each sale.

On a call with investors following Wednesday’s earnings release, eBay CEO Donahoe said he’s already seeing some positive momentum as a result of the restructured fee model.

“It’s only been about six weeks since the changes we announced have gone into place, but in both the U.S. and the U.K. we’re encouraged by the results we’re seeing,” said Donahoe.

According to the company, the number of listings on the site in the first quarter grew 10% from the prior year.

But the growth rate of the company’s gross merchandise volume, or the total dollar amount for items sold, is down, coming in at $16.04 billion — an increase of 12% over the first quarter of 2007 but down from the 14% growth seen in last year’s first quarter.

“Sustained GMV [gross merchandise volume] growth acceleration in eBay’s core U.S., UK and German markets is key, we believe, to the company’s fundamentals and stock price,” Citigroup analyst Mark Mahaney said in a written report.

The growth rate of active eBay users is also down, coming in at 1% compared to 10% in the year-ago quarter. And according to a recent Nielsen Online report, Web traffic to eBay decreased three percent year-over-year.

New CEO Donahoe told investors that 2008 would be a year of “bold changes” for eBay. His three top priorities are making the company’s sites easier and safer to use, improving pricing and incentives and growing PayPal, an eBay subsidiary.

But, as the company’s CFO Bob Swan conceded, there’s still a lot of work to be done.

“For the remainder of 2008 we’ll continue to focus on the strategies we’ve put into motion,” Swan said in a written release.

For the second quarter, the company says it expects revenues in the range of $2.1 billion to $2.15 billion, roughly in line with current estimates of $2.11 billion. Profits, excluding charges, are expected to come in at 39 cents to 41 cents per share, also in line with analysts’ forecasts of 40 cents per share.