By Geoffrey A. Fowler
Of THE WALL STREET JOURNAL
EBay Inc.'s (EBAY) profit fell 29% and revenue declined 4% as
the company continued its pursuit of a turnaround in a harsh
climate for consumer spending.
Still, the e-commerce company outperformed analyst expectations,
as the decline in eBay's core marketplace leveled off and its
PayPal online-payments unit grew strongly.
The results drove eBay's shares up 4.7% to $20.37 in after-hours
trading, after they closed at $19.45, up 2.7%, in 4 p.m. EDT
trading on the Nasdaq Stock Market.
EBay posted quarterly profit of $327 million, or 25 cents a
share, down from $460 million, or 35 cents a share, a year earlier.
Revenue was $2.1 billion, down from $2.2 billion, as customers
continued to turn elsewhere for online purchases.
"We drove solid second quarter results, with strong momentum and
market-share gains at PayPal and continued stabilization in our
core eBay business," said eBay Chief Executive John Donahoe, in a
prepared statement.
The results were buoyed by growth at PayPal, where revenue
increased 11% and the number of active registered accounts grew 20%
during the quarter.
(This story and related background material will be available on
The Wall Street Journal Web site, WSJ.com.)
There were also signs that changes Donahoe has made in eBay's
marketplace - which accounts for the majority of its revenue - were
taking hold. The business's revenue decline slowed to 14% in the
second quarter from an 18% fall in the first quarter. The drop in
the company's gross merchandise volume, the total amount of goods
that eBay sold excluding vehicles, also slowed to 10%, after
falling 16% in the previous quarter.
It still looks like it's a long turnaround for eBay [but]
they're getting worse less quickly," said Jeffrey Lindsay, an
analyst with Sanford C. Bernstein. He said he is looking for growth
in eBay's total active users, but that figure grew less than 1%
versus the first quarter.
Some small merchants say eBay's marketplace has stopped working
for them. Travis Hill, who runs Last Chance Records in Little Rock,
Ark., said he now averages about half of the eBay sales he did at
this time last year. He blames a recent change in eBay's search
engine, called "best match," for reducing his exposure on the
site.
"EBay is nearing the point of no longer being a viable business
tool for us," said Hill. He added that he also sells merchandise
through Amazon.com Inc. (AMZN), and is actively developing his own
site for his company.
EBay issued cautious guidance for the third quarter that was in
line with analysts' expectations. The company forecast revenue in
the range of $2.05 billion to $2.15 billion, and earnings per share
of 22 cents to 24 cents.
The company also responded Wednesday to a lawsuit filed this
week by retailer Steven Madden Ltd. (SHOO) over the potential sale
of counterfeit watches in EBay's online marketplace. EBay Deputy
General Counsel Mary Huser said Steve Madden should have first
reported the issue to eBay before filing "unnecessary
litigation."
-By Geoffrey A. Fowler, The Wall Street Journal;
415-765-8258