eBay Not Expecting a Big Christmas Bonus
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The roller-coaster ride in markets amid the credit crisis has barreled through eBay's third quarter and outlook for the end of the year. The online auction and e-commerce giant said it expects a much weaker fourth quarter, largely due to a drop-off in consumer spending.
"We saw weakness across our entire portfolio of businesses," said Bob Swan, eBay's chief financial officer, during a conference call today to discuss eBay's third quarter results. John Donahoe, president and CEO, said the significant slow down that eBay experienced in the second half of the quarter suggests the company will be operating in a difficult economic environment for the near future and early next year.
Revenue was $2.1 billion for the third quarter ending Sept. 30th, up by 12 percent over the same time last year. Net income was $492 million, or 38 cents per share. A year ago, eBay (NASDAQ: EBAY) lost $936 million, or 69 cents per share because of a charge related to its purchase of Internet calling company Skype.
A strengthening dollar and a tougher economic climate as the quarter ended left consumers pulling back on spending and have become the watchwords for the largest e-commerce player on the planet.
In addition, eBay is under pressure to improve its competition with Amazon (NASDAQ: AMZN). Officials described how eBay is strengthening its platform for providing buyers with a stronger mix of auctions and fixed prices sales, as well as adjusting its fixed price fees for sellers, as just a few examples.
"Clearly a tough economy makes our job more difficult," Donahoe said, "but we remain committed to reinvigorating the growth in our business." Buyer and seller expectations have been rising and eBay needs to keep up, Donahoe added.
eBay did have bright spots to note in its profitable quarter. Paypal revenues were up by 27 percent year-over-year to $597 million. Web-based calling service Skype rose to $146 million, up 46 percent. Classified ad revenue -- a fairly new area for eBay -- rose by 59 percent and revenues from its ticket-selling business StubHub.com rose by 46 percent, helped by its partnership with Major League Baseball.
But eBay is pulling back on its expectations for the fourth quarter. Revenue is now expected to come in at $2.17 billion, officials said, or about 39 cents to 41 cents earnings per share. Prior guidance had been $2.44 billion for the quarter. Its full-year expectation is now between $8.53 billion and $8.68 billion, lower than the range of $8.8 billion to $9.05 billion analysts for Reuters estimates had expected.
eBay said the lowered revenue range is also wider than it normally gives in order to reflect the uncertainties it sees in the consumer spending environment, which is similar to what Intel (NASDAQ: INTC) said on its quarterly conference call.
"I wish I could provide more clarity [about] the critical holiday season," Swan said when asked about the Christmas selling season. "But honestly, there is not."
Shares had fallen by 4.5 percent to $14.64 during after-hours trading.