EBay posts third-quarter profit, warns about year ahead

EBay Inc. posted a third-quarter profit today that beat analysts' forecasts. The online auction giant reversed a loss from the same period a year earlier, when it took a big charge stemming from its acquisition of telecommunications company Skype.

EBay earned $492 million, or 38 cents a share, compared with a loss of $936 million, or 69 cents a share, a year earlier, when it took a $1.4-billion write-down for Skype. Excluding certain items, EBay said it would have made $592 million, or 46 cents a share, in the quarter. Analysts were expecting 41 cents a share.

Revenue grew 12% to $2.12 billion, a bit lower than anticipated. Analysts were expecting revenue of $2.13 billion.

But EBay warned that its full-year revenue would fall below its previous forecast as the company attempts to revive growth in its online auction business.

Shares fell 14% in regular trading to $15.33 on fears that the deepening recession would hammer EBay's online auction business. Similar concerns hit online retailer Amazon.com Inc., which fell 13% to $48.72.

EBay's stock has sold off sharply in recent months. The San Jose company is in the midst of an overhaul. Last week EBay warned that third-quarter revenue would be at the low end of a previous forecast of $2.1 billion to $2.15 billion and that it planned to cut 10% of its staff.

"We believe that macro weakness will continue to crimp consumer demand," Youssef Squali of Jefferies & Co. wrote in a research note Tuesday.

Chief Executive John Donahoe is trying to shake up the business to catch up with rival Amazon.com, sometimes making moves that have riled online sellers.

He said today that he was overall pleased with EBay's performance in light of the "very challenging external environment" that he expects to continue into the fourth quarter and beyond. "These are turbulent times for which no one has the perfect playbook," he said. He also said turmoil in the markets was having an effect on consumer spending and that EBay was feeling "that impact across all of our platforms."

-- Jessica Guynn

Photo: EBay CEO John Donahoe. Credit: Saul Loeb / AFP/Getty Images

Comments

[ricroe]

In the past, recession helped drive eBay, spiking sales as well as earnings.

In the face of a worldwide recession, eBay finds sales shrinking and it's stock value setting record lows on a weekly basis at a time when sales should boom.

Mr Donahoe's vision of converting eBay into Amazon light is why this formerly recession proof retailer is sinking. The new systems and policy changes imposed during Mr Donahoe's short tenure are alienating buyers and sellers alike with search methods that do not return relevant results and fee's that are perceived by sellers as greedy and excessive.

Mr Donahoe's lack of experience as a buyer and seller on eBay has blocked his ability to see that recent policy changes have created the failures his company faces. The eBay marketplace is collapsing upon itself because of the failure of Mr Donahoe and his team and if current changes are allowed to stand, eBay will be the next Internet failure.

Mr Donahoe's lack of experience as a buyer and seller on eBay has blocked his ability to see that recent trends are causing the failures his company faces.

The eBay marketplace is collapsing upon itself because of the failure of Mr Donahoe and his team and if current changes are allowed to stand, eBay will be the next Internet failure.