Ebay's Latest Acquisition – The Numbers
Tuesday, March 29, 2022 1:30 PM



Yesterday, March 28, eBay, Inc. (NASDAQ: EBAY) announced the company is buying GSI Commerce (NASDAQ: GSIC), offering $29.25 per share. The deal values GSI Commerce at $2.4 billion, a 50 percent premium over the company's existing value, based on Friday's share price.

GSI Commerce is an on-line service provider, assisting corporations with marketing and order fulfillment through Internet sales and purchasing. Customers listed on the company's home page include Toys-R-us, the NFL, Ace Hardware and Levi's. The eBay press release states GSI Commerce has 180 customers in 14 market sectors. The purchase provides eBay with a foothold in rapidly growing arena of retail e-commerce.

What will eBay obtain, numbers-wise, for its $2.4 billion investment? Here are some of the numbers from the GSI Commerce 2010 results:

  • Revenues: $1.36 billion
  • Non-GAAP income from operations: $134.7 million
  • Net income: loss of $36.5 million or minus 57 cents per share

Net income for 2010 was affected by some one-time charges. Net income for 2009 was a loss of $11 million and the company is projecting income from operations of $18 million for 2011. The GSI Commerce investor information and press releases put a lot of emphasis on non-GAAP income from operations – NGIO. The number is income before amortization, depreciation, acquisition and stock based compensation expenses are subtracted. The stock based compensation number is a bit eye-catching. The company is projecting an expense of $37 million for 2011 in stock compensation.

To compare, here are the 2010 results from eBay:

  • Revenues: $9.156 billion
  • Net income: $1.801 billion

Ebay does manage to bring a healthy portion – 20 percent – of revenues to the bottom line. However, the net was down by 25 percent in 2010 from the previous year on 5 percent higher revenues.

The purchase of GSI Commerce is viewed as an attempt by eBay to expand from its base of on-line auction sales, where the sellers are of the small business variety into major on-line retail commerce and compete with Amazon.com. Much of the GSI Commerce does differs from the eBay model with warehouses and fulfillment centers to process orders for customers. Ebay leaves it up the the sellers on the website to arrange for shipping of sold goods. The management of eBay has stated some of the GSI Commerce business will be sold off including the licensed sports merchandise business and 70 percent of on-line retail companies Rue La La and ShopRunner.

The eBay share price dropped by about 4 percent on Monday when the deal was announced. Through the morning on Tuesday, about half of the drop has been recaptured. Shares of eBay have gained 16 percent over the past year, lagging main rival Amazon.com, which has gained over 40 percent in the same time frame.

 

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