EBay Earnings Beat Estimates, Investors Opt to “Buy it Now”

April 24, 2009

Last year, eBay struggled due to controversy over its policies, and stagnating sales growth after years of explosion in customer volume.  However, thanks to a disciplined and diverse strategy, much like its fellow tech giant Google, it has weathered perhaps the worst of the recession storm and has returned to profitability.

The company reported higher than expected earnings for the quarter thanks to a number of cuts, and solid growth from properties PayPal and Skype.  These positive results came despite the company reporting lower quarterly net profit, sales, and margins from its auction business.  Overall revenue dropped from $460M USD in the same quarter last year to $375M USD.

Year to year PayPal revenue rose 11 percent.  Skype soared even higher, reporting a 21 percent increase.

Interestingly, eBay is not giving up on the auction site, though — it is planning on possibly spinning off the successful Skype in order focus on its auction competition with Amazon.com.  Shares of eBay soared last night, and today are up over 8 percent.

EBay hopes to score as much as $2B USD from a sale of Skype.  Chief Executive John Donahoe says that his company hopes for sale of Skype within two years.  He states, "As I look forward, I think it will in the next 24 months benefit from being a stand-alone company."

Still, analysts remain cautious about eBay’s turnaround plans.  Sanford C. Bernstein analyst Jeffrey Lindsay, states, "They’re not seeing any light at the end of the tunnel.  The strategy for eBay and Yahoo yesterday is, ‘We’re just going to ride this out.’ Amazon might be a lot more exciting."

Ryan Jacob, portfolio manager at Jacob Internet Fund, concurs, stating, "The positive news is we’ve been accustomed to being disappointed (by eBay).  In this case, they did exceed the numbers a bit and the guidance was in line, so that alone is probably cause for some relief.  (But) the core problems are still there."

This post has been written by Jason Mick on April 23, 2009 8:50 PM couresy of dailytech.com.

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