eBay Sees First-Ever Revenue Drop
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Amid stiffening competition and frigid consumer spending, online auction giant eBay reported today that its fourth-quarter earnings dropped 31 percent from the same period a year ago and the company suffered its first year-to-year drop in revenue.
eBay's total revenue of $2.04 billion for the quarter was down 6 percent, or $145 million, from 2007. Analysts polled by Thomson Reuters were expecting revenue of $2.1 billion.
Net profits for the quarter dropped to $367 million, or 29 cents per share, down from $531 million, or 39 cents a share, a year ago.
Discounting one-time items, eBay (NASDAQ: EBAY) earned 41 cents per share, 2 cents higher than analysts' estimates.
"Clearly, we've been operating in an almost unprecedented external environment," John Donahoe, eBay's president and CEO, said on a conference call with analysts today after the market closed. "This was an extremely difficult holiday season."
He added, "There's no doubt that eBay was influenced by the macro economy, and our fourth quarter reflects this."
eBay's troubles are hardly a revelation to the financial community.
In a recent research note, Barclays analyst Doug Anmuth noted eBay is getting hit by the same macroeconomic headwinds that are ravaging the balance sheets of companies across all industries in the economy. But he also warned that "eBay is the most structurally challenged" of the large-cap Internet firms he tracks, adding that "we see limited evidence to suggest the many marketplace changes eBay made in 2008 are stimulating activity on the platform."
In a similarly pessimistic forecast, Citigroup's Mark Mahaney said that eBay is highly vulnerable to "severe Macro conditions, ongoing marketplace uncertainties and an increasingly competitive environment."
eBay's biggest move in the quarter came in early October, when the auction giant bought the Bill Me Later payments service for $945 million in cash and options. Two months after the acquisition, Amazon (HASDAQ: AMZN), eBay's chief rival, announced that it would no longer accept Bill Me Later as a payment option.
CFO Bob Swann said that the company is moving swiftly to integrate Bill Me Later with its popular PayPal service.
"The acquisition is off to a great start," Swann said.
Concurrent with the Bill Me Later acquisition, eBay announced its purchase of Den Bla Avis and BilBasen, both Danish classified businesses, for around $390 million.
The company also moved ahead with plans to cut its workforce by about 10 percent, eliminating about 1,000 employees and several hundred temporary workers.
Donahoe reiterated his focus on improving the shopping experience of the marketplace by providing incentives for the highest-quality sellers and weeding out abusive or fraudulent users.
"Today eBay is safer and easier to use than a year ago," Donahoe said. "But let me be clear: we still have a lot of work to do."
"All in all, we played a pretty decent game when most other playbooks failed," he added.
Shares of eBay were down more than 6 percent in after-hours trading.