RealTime IT News

eBay Misses, Hits, Hunts For More in China

Online auction provider eBay recorded another record quarter. Profits soared by 44 percent to $205.4 million (over last year's $142 million profit) in the last three months of 2004, and the company said it would invest $100 million to expand its presence in China's white-hot online market.

But the results could not keep investors happy after earnings per share came in at 33 cents (30 cents with all charges counted, compared to 21 cents per share during last year's fourth quarter), below analysts' expectations by a penny. Shares of the online auction player tumbled in after-hours trading by about 10 percent.

Revenues were $935.8 million in the quarter, also up by 44 percent from the $648.4 million year-over-year. The currency exchange rate of the U.S. dollar against the Euro and other currencies factored into the results, as did strong growth across major regions such as China, the U.K., France, Australia and Spain.

eBay's guidance also made some investors glum. The company, which recently raised fees for members, said it expects first-quarter earnings of between 34 and 35 cents a share and sales in the range of $1.01 to $1.03 billion, both below forecasts. The results had analysts asking eBay where else the hot-growth company could find growth.

During a conference call, eBay officials said the company would invest up to $100 million in China (which represents about 2 percent of its global revenue) in order to build out its competitive presence there.

"We think China could be the biggest e-commerce opportunity anywhere," said Meg Whitman, eBay's CEO, during the call. Because China is coming of age in a more developed Internet industry, it also has the benefit of 20-20 hindsight about the mistakes that many online companies made leading up to and after the dot-com bubble burst, she added.

"Money is pouring in, and the competitive landscape is dynamic," she said of the opportunities in the country, where the middle class is estimated to be between 200 million and 400 million strong. "They're becoming increasingly affluent. The net result is that it's a large opportunity. The goal is to expand e-commerce there," Whitman said.

Still, officials noted that the China region is not yet profitable for eBay. But they expect that to change, due to the way growth is expanding. Other growth plans include expanding its PayPal presence in China, albeit a bit more slowly, and increasing its merchant services overall.

Despite missing expectations, eBay had some bright spots. It brought in 3.9 million new users in the fourth quarter. Overall, sales were helped by strength across all categories, but especially with computers, collectibles, toys and entertainment devices.

It was also a pretty good year for eBay. Gross Merchandise Volume, which is the total value of all successfully closed listings on eBay's trading platforms, hit a record $34.2 billion during 2004, which represents a 44 percent year-over-year increase from the $23.8 billion reported in the full year 2003.

The company's consolidated net revenues totaled $3.27 billion, a 51 percent improvement from the $2.17 billion reported in the full year 2003. The company also announced a two-for-one stock split, effective Feb. 16th.