EBay tops earnings, revenue expectations in Q2

EBay exceeded Wall Street's revenue and earnings expectations in its 2005 second quarter, ended June 30, helped by strong performance in the U.S. and Germany and in its PayPal unit, the online marketplace said Wednesday.

EBay reported net revenue of US$1.086 billion, up 40 percent from last year's second quarter and above consensus expectation of US$1.042 billion from analysts polled by Thomson First Call.

Net income rose 53 percent to US$291.6 million, or US$0.21 per share. On a pro forma basis, it was up 55 percent to US$307.2 million, or US$0.22 per share, topping consensus expectations of US$0.18 per share.

Pro forma net income excludes certain items, including stock based compensation expenses and related payroll taxes, as well as amortization of acquired intangible assets and related income taxes, according to eBay.

"We have focused on increasing the value of the marketplace for our users by investing in high-return initiatives and product innovation, and most importantly, we've intensified our efforts to connect with our community of users who are at the heart of our success," said Meg Whitman, eBay's president and chief executive officer, during a conference call to discuss the results.

After many sellers complained about eBay's decision to raise some fees earlier this year, the company made it a priority to reach out to them through online townhall meetings, in-person events and open houses, to engage them in conversations with eBay's management, initiatives which eBay considers were a success, Whitman said.

Net revenue broke down as follows: US$423.6 million came from eBay marketplace activity in the U.S., up 27 percent, while US$418.8 million came from eBay marketplace activity abroad, up 51 percent, and US$243.9 million was generated by the online payment unit PayPal, up 51 percent.

Business was strong in the U.S. and in Germany, where performance had fallen below expectations in the first quarter, Whitman said. Other countries posting solid performance were the U.K., where gross merchandise volume grew 94 percent compared with 2004's second quarter, she said. Gross merchandise volume grew in the triple digits in France, Italy and Australia, while eBay's Spain unit reached a milestone when it exceeded 1 million registered users during the quarter, she said.

Whitman also addressed eBay's planned acquisition of comparison shopping site Shopping.com Inc., which she said is expected to close in the third quarter of this year. After the deal closes, eBay will provide more details on its plans for integrating Shopping.com into its business, she said.

EBay ended the quarter with 157.3 million confirmed registered users, up 38 percent, and with 64.6 million active users, which are defined as users on the eBay platform who bid, bought, or listed an item within the previous 12-month period, up 34 percent.

Meanwhile, new listings were 440.1 million, up 32 percent. Gross merchandise volume, the total value of all successfully closed listings on eBay's trading platforms, was US$10.9 billion, a 36 percent increase.

The PayPal online payment unit closed the quarter with 78.9 million total accounts, a 56 percent increase, while total payment volume, the dollar volume of payments initiated through the PayPal system, was US$6.5 billion, a 49 percent increase.

Looking ahead, eBay expects net revenue for the entire year to be in the range of US$4.340 billion to US$4.410 billion. In the third quarter, eBay expects net revenue to be between US$1.045 billion to US$1.070 billion. The company expects to finish the year with earnings per share or either US$0.77 or US$0.78, up from previous guidance of between US$0.71 to US$0.73. In the third quarter, eBay now expects earnings per share of US$0.18.

In terms of pro forma earnings per share, the company expects them to be either US$0.82 or US$0.83 for the full year, up from a previous estimate of between US$0.76 and US$0.78, and to be US$0.19 in the third quarter.

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Juan Carlos Perez

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