EBay Inc. (NASDAQ: EBAY): Third Quarter Earnings Preview 2010
Wednesday, October 13, 2010 10:28 AM

EBay Inc. (NASDAQ: EBAY) is scheduled to release its third quarter earnings after the closing bell on Wednesday, October 20, 2010. Analysts, on average, expect the company to report earnings of 37 cents per share on revenue of $2.18 billion. In the year ago period, the company reported earnings of 38 cents per share on revenue of $2.24 billion.
EBay Inc. and its subsidiaries provide online marketplaces for the sale of goods and services, online payments services, and online communication offerings to individuals and businesses in the United States and internationally. It operates in three segments: Marketplaces, Payments, and Communications.

In the preceding second quarter, the San Jose, California based company's net income was $412 million, or 31 cents a share, compared to $327 million, or 25 cents a share in the prior-year quarter. On an adjusted basis, the company earned 40 cents per share in the second quarter. Revenue rose 6% to $2.22 billion from $2.10 billion in the same quarter last year.  Analysts, on average, expected the company to report earnings of 38 cents per share on revenue of $2.17 billion. Gross merchandise volume, excluding vehicles, rose 13% year-over-year to $12.53 billion for the second quarter.

In July, the company lowered its fiscal 2010 guidance, citing currency fluctuations. EBay expects full-year GAAP earnings in the range of $1.23 to $1.28 per share, non-GAAP earnings of $1.60 to $1.65 per share, and net revenues in the range of $8.8 billion to $9.0 billion, excluding Skype. Previously, the company anticipated full year GAAP earnings in the range of $1.29 to $1.34 per share, non-GAAP earnings of $1.63 to $1.68 per share, and net revenues of $8.8 billion to $9.1 billion, excluding the impact of Skype. The company said that the stronger dollar will hurt revenue by approximately $250 million or $0.09 to $0.11 in EPS for the full year.

The company recently said that it expects its third-quarter results to be near the high end of previous guidance, which called for GAAP earnings in the range of 26 cents to 28 cents per share, non-GAAP earnings in the range of 35 cents to 37 cents per share, and net revenues in the range of $2.13 billion to $2.18 billion, excluding Skype. The company expects a stronger dollar to have a negative impact on third quarter results of approximately $70 million in revenue and approximately $0.02 in earnings per share.

Ebay, which started as an online auction company, later added fixed-price items to its marketplace in order to position itself as a conventional online retailer. However, in doing so, the company alienated a significant base of customers, both buyers and sellers.

Meanwhile, Paypal has continued to grow at a remarkable pace. The company added 1 million new accounts each month during the second quarter. At the end of the second quarter, PayPal had more than 87 million active accounts in 190 markets and 24 currencies around the world.

The company is targeting mobile commerce market to drive future growth. The company, which has emerged as a leader in the m-commerce market, expects mobile apps to generate $1.5 billion in gross merchandise volume this year, more than 2.5 times its volume in 2009. Last year, Ebay's mobile channel accounted for more than $600 million in sales.

Early in September, EBay announced that a Delaware judge ruled in its favor in a shareholder suit filed against Craigslist, and its majority shareholders Jim Buckmaster and Craig Newmark. The ruling restored eBay's 28.4% share in Craigslist that was refused by the controlling shareholders of Craigslist in 2008.

In August, Skype S.à r.l. announced its plan to go public through an initial public offering of up to $100 million of American depositary shares, or ADSs, each representing ordinary shares of Skype S.A., a joint stock company existing under the laws of the Grand Duchy of Luxembourg. Early in October, Skype S.A. announced that it has appointed Tony Bates, a former executive of Cisco, Systems Inc. (NASDAQ: CSCO), as its new chief executive and a member of the board of directors.  In 2009, eBay sold 70% of the company for $1.9 billion to an investment group led by private-equity firm Silver Lake Partners. EBay retains a 30 percent stake in Skype.

In terms of stock performance, EBay shares have gained nearly 5 percent since the beginning of the year.

Disclosure: Author doesn't own any of the stocks discussed here.


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