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Wed Jan 21 2009 16:33:58

eBay Reports Fourth Quarter 2008 Results

By: Ina Steiner

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eBay posted its fourth-quarter 2008 earnings after market close today. Here's an excerpt of its press release, the full release is on its website here. Conference call with analysts commences at 5 pm Eastern.


eBay Inc. Reports Fourth Quarter and Full Year 2008 Results

eBay Inc. (Nasdaq:EBAY) today reported financial results for its fourth quarter and year ended December 31, 2008. The ecommerce company posted fourth quarter revenue of $2.04 billion, representing a $145 million year-over-year decrease due primarily to the impact on eBay of a stronger dollar and macroeconomic conditions globally. PayPal, Classifieds, text and graphical advertising and Skype performed well, growing revenue on a year-over-year basis. The company recorded net income on a GAAP basis of $367 million or $0.29 per diluted share, and non-GAAP net income of $524 million or $0.41 per diluted share.

For the full year, eBay Inc. posted $8.54 billion in revenue, net income on a GAAP basis of $1.78 billion or $1.36 per diluted share, and non-GAAP net income of $2.24 billion or $1.71 per diluted share.

GAAP operating margin decreased to 22.3% for the quarter, from 28.7% for the same period last year. Non-GAAP operating margin decreased to 32.8% for the quarter, from 34.6% for the same period last year. For the full year, GAAP operating margin came in at 24.3%, with non-GAAP operating margin at 32.1%.

eBay Inc. generated $684 million of operating cash flow and $525 million of free cash flow during the fourth quarter. The company’s full year operating cash flow was $2.88 billion and free cash flow was $2.32 billion.

"While the holiday season was tough and competitive, our overall results for 2008 were strong," said eBay Inc. President and CEO John Donahoe. "For 2008, we delivered double-digit revenue and earnings growth; made significant changes in our eBay business; and built a stronger, more diverse portfolio of leading e-commerce businesses. We will build on our strengths in 2009 while managing our business prudently in the continued challenging environment."

Quarterly Business Highlights

  • eBay Inc. completed the acquisition of Bill Me Later to further extend PayPal’s leadership position in online payments.
  • eBay Inc. completed the acquisition of Den Bla Avis (dba.dk) and BilBasen (bilbasen.dk) in Denmark to further extend its global leadership position in online classifieds.
  • eBay Inc. completed the acquisition of Ticket Technology to enhance the selling platform for StubHub.
  • eBay Inc. completed the acquisition of Positronic, a developer of predictive search technology, to enhance eBay’s efforts to bolster search functionalities on its ecommerce sites.
  • eBay Marketplace sellers in the U.S. lowered shipping costs significantly – dropping the average shipping costs to buyers by 25% compared to the fourth quarter of 2007.
  • Jack Sheng of eForcity, Inc., became eBay Marketplace’s first ever 1 million feedback seller.
  • StubHub announced a partnership with the NHL franchise Buffalo Sabres, HSBC Arena and Tickets.com to enable an integrated ticketing solution for the team and arena.
  • eBay’s Classifieds businesses averaged 91 million unique visitors per month during the quarter, representing an increase of 41% year over year.
  • PayPal expanded its reach on the Web with the launch of merchant service account deals with American Airlines (U.S.), Hoyts Cinemas (Australia), Promarkt (Germany), Aldo Shoes (Canada), Jet2 (U.K.), Laura Ashley (U.K.), Amway (U.S.), and Zappos.com (U.S.).
  • PayPal continued its global expansion with the launch of new localized sites in Mexico, Hong Kong and Singapore.
  • PayPal extended its mobile strategy by partnering with RIM to become the exclusive payment option on the BlackBerry Application StoreFront.
  • SkypeOut minutes reached 2.6 billion globally, a 61% increase year-over-year, driven by very strong adoption in Asia.
  • Skype expanded its senior leadership team with the addition of Daniel Berg as chief technology officer and Christopher S. Dean as chief strategy officer.
Quarterly Business Unit Discussion

Marketplaces

The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, recorded $1.27 billion in revenue, equating to a 16% year-over-year decline. The revenue drop was attributable to the impact made by the strengthening dollar and the slow-down of the ecommerce market globally on the eBay business. While average monthly unique visitors were down year over year, eBay remained the number one ecommerce site in the U.S., the U.K. and Germany during the 2008 holiday shopping season, according to Nielsen Online. Approximately 55% of Marketplaces revenue came from markets outside the U.S. Gross merchandise volume (excluding vehicles) was $11.47 billion for the quarter, a decrease of 12%, compared to the fourth quarter of 2007. Online classifieds as well as text and graphical advertising revenue grew during the quarter. eBay continues to focus on buyer and seller initiatives to accelerate sold items in the U.S., the U.K. and Germany.

Payments

The Payments business unit posted another solid quarter with $623 million in revenue, an increase of 11% year over year. Net total payment volume (TPV) for the quarter was $15.99 billion, an increase of 14% year over year. The revenue and net TPV growth was fueled by expanded adoption of PayPal Merchant Services across the Web and the inclusion of Bill Me Later, acquired on November 7, 2008. Active accounts reached 70 million, an increase of 23% year-over-year. The Payments business will continue to focus on greater penetration into the Marketplaces business as well as the acquisition of new merchants.

Communications

Skype contributed $145 million in revenue for the quarter, representing 26% year-over-year growth, and posted an eighth consecutive quarter of segment profitability. Skype added 35 million new users during the quarter and ended the period with more than 405 million registered users. In addition to growing its user base, Skype is focused on product strategies to enhance customer engagement.

Other Selected Financial Results

  • Taxes — The GAAP effective tax rate for the quarter was 22%, compared to 21% for the fourth quarter of 2007. The non-GAAP effective tax rate was 24% for both the fourth quarter of 2007 and 2008. The GAAP effective tax rate for 2008 was 19%, while the full year non-GAAP tax rate came in at 21%.
  • Cash and cash equivalents — The company’s cash and cash equivalents totaled $3.19 billion at December 31, 2008, compared to $4.22 billion at December 31, 2007.

Business Outlook

  • First quarter 2009 — eBay expects net revenues in the range of $1.800 to $2.050 billion with GAAP earnings per diluted share in the range of $0.21 to $0.23 and non-GAAP earnings per diluted share in the range of $0.32 to $0.34.

Quarterly Conference Call

eBay will host a conference call to discuss fourth quarter results at 2:00 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, can be accessed through the company’s Investor Relations web site at http://investor.ebay.com. In addition, an archive of the webcast will be accessible through the same link.

About eBay Inc.

Founded in 1995, eBay Inc. connects hundreds of millions of people around the world every day, empowering them to explore new opportunities and innovate together. eBay Inc. does this by providing the Internet platforms of choice for global commerce, payments and communications. Since its inception, eBay Inc. has expanded to include some of the strongest brands in the world, including eBay, PayPal, Skype, StubHub, Shopping.com, and others. eBay Inc. is headquartered in San Jose, California.

Update 1/22/09: You can find the eBay Inc. Q4 2008 Earnings Call Transcript on SeekingAlpha.com.






Comments (71) | Permalink

Readers Comments

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

This user has validated their user name. by: Ina

Wed Jan 21 16:36:49 2009

Interesting factoid: eBay Marketplace sellers in the U.S. lowered shipping costs significantly – dropping the average shipping costs to buyers by 25% compared to the fourth quarter of 2007.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

This user has validated their user name. by: Ina

Wed Jan 21 16:38:09 2009

The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, recorded $1.27 billion in revenue, equating to a 16% year-over-year decline.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

This user has validated their user name. by: Ina

Wed Jan 21 16:39:56 2009

Gross merchandise volume (excluding vehicles) was $11.47 billion for the quarter, a decrease of 12%, compared to the fourth quarter of 2007.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Jay

Wed Jan 21 16:58:50 2009

It is now official. Ebay is the past, and alternative sites are the future.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Daisy

Wed Jan 21 17:01:36 2009

There's already a flurry of after hour selling.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Ebay's Slow Death

Wed Jan 21 17:06:09 2009

Thanks for the info Ina!

I love it!  Almost all of Ebay's numbers are down, but it is because of the Dollar and a Challenging Environment-LOL.  Ebay management has made it CHALLENGING!

Ebay just doesn't work for the small Seller anymore. When I do manage to sell anything, the Buyers often won't pay me.  So there goes all my hard work.

I'm trying other sites, especially Bonanzle.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Jay

Wed Jan 21 17:07:39 2009

I predict that by this time next year, people will not be talking about Ebay.  They will be talking about one of the several other sites with passion.

I don't think there is anything Ebay management can do to alter this trend. They have created too much distrust amongst the Ebay community.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: ss

Wed Jan 21 17:34:31 2009

I can't believe that they still think its the economy. Its management stupid. Ebay should be thriving in this economy.

Ebay will be penny stock by summer. They earned it and they deserve it. Any person with Ebay stock is an idiot.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Dman

Wed Jan 21 17:37:07 2009

"eBay Marketplace sellers in the U.S. lowered shipping costs significantly – dropping the average shipping costs to buyers by 25% compared to the fourth quarter of 2007. "

Don't drink the Kool-Aid on this one, I just factored my shipping cost into the Buy It Now price, you buyers still paid it. What a joke, this highlight is.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Patrick Alexander

Wed Jan 21 17:49:38 2009

To JD: It's NOT the economy stupid !!

eBay should be thriving in this economic climate.

How much further will the degradation of this site have to go before the institutional stockholders demand all of the top management's heads ? And maybe some on the board for allowing this to continue....

That is the only question left. Answer coming soon, I think.

Stay tuned......

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: On Lies and Secrets

Wed Jan 21 17:54:27 2009

@ Ina

RE: ''Interesting factoid: eBay Marketplace sellers in the U.S. lowered shipping costs significantly – dropping the average shipping costs to buyers by 25% compared to the fourth quarter of 2007. ''

Unbundling the meaning in what they are reporting is an interesting task.  Exactly what is the ''shipping cost'' number that they are reporting based on? How have they calculated this percentage? Is this number based on the real shipping costs for items that sellers actually pay to their shippers or is it based on the figure reported in what sellers put in their listings as the shipping cost? The ebay corporation has introuduced shipping caps in a few categories irrespective of actual shipping costs for a shipment. The shipping caps cause sellers to put any differences of cost into the item price rather than asking for actual shipping.  Also, it appears that under a Best Match sort, sellers who offer ''free'' shipping receive preferential placement, so sellers simply increase the asking price for items to cover the shipping cost because shipping has a real cost.

In my opinion, the statistic that ebay is offering can be misleading depending on how you interpret it. I suspect the implication is that sellers have historically been inflating shipping costs and now are suddenly more efficient, when I suspect that a different dynamic is happening - actual shipping costs are being hidden from a buyer and are being reflected in the price of goods.  If this practice of hiding parts of the shipping cost in the item price is what is actually going on in a significant number of cases, then I doubt that this can be a sustainable practice without eventually pricing goods sold on ebay out of the ecommerce market as a whole.

Another point to consider is that when shipping is included in the item price, ebay takes higher fees from the transaction as a whole.

I think there are a lot of issues right beneath the surface of the ebay corporation's stated statistics.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: On Lies and Secrets

Wed Jan 21 18:08:57 2009

@ Ina

Re: ''The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, recorded $1.27 billion in revenue, equating to a 16% year-over-year decline.''

Another interesting statistic that has been reported, but from my perspective there is not enough information present in it to come to a clear conclusion about what is actually going on within the corporation.  Many others have called attention to the fact that ebay is reporting these revenue figures for their ''marketplaces'' as a whole, and they appear to be based on aggregated data from all of their seperate entities.  So an overall decline of 16% year over year revenue is for the whole, but what is the percentage decline (if any) for ebay core? what is the decline (or increase) for stubhub?  In aggregating these figures, it is hard to get a clear sense of the health of specific parts of the marketplaces and I suspect the health of ebay core is more significant than that of other marketplaces businesses. I would *love* to see the year over year revenue figures broken down by each entity in the ebay ''marketplaces''. Perhaps the shareholders will ask about this in the conference call.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: On Lies and Secrets

Wed Jan 21 18:20:11 2009

''eBay Inc. completed the acquisition of Bill Me Later to further extend PayPal’s leadership position in online payments.''

I found this part to be interesting.  What are the implications of this acquisition? So far, paypal has been able to escape significant regulation by claiming that they are not a bank and therefore not subject to the laws regulating banks.  Does this acquisition change the regulatory environment for the payment services?  

We now have a new administration in Washington and the popular sentiment in the wake of bank bailouts by taxpayers has, from my perspective, caused the widespread desire for more active government oversight of banking institutions.  I can't predict the future, but there may be more (sorely needed) regulatory oversight in the company's future.

I am interested in knowing what others think about this.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Franci

Wed Jan 21 20:47:22 2009

eBay's revenue is off by 31% for the fourth quarter.  Normally this is the company's biggest quarter.  Add to that the in the same period they also added about 10 million listings from new big diamond sellers and the numbers take on a new meaning.  If the company lost 31% in a usually big quarter when it had nearly double the usual listings,  then things at eBay are not just troubling, that are terrible.  

If you remove the diamond sellers, what would the number have been....50% decline?

If Amazon's numbers at the end of this month are even passing good, eBay will be finished. It may be toast anyway.



eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: TIRED

Wed Jan 21 21:11:55 2009

eBay Inc (EBAY) (13.28 +0.73)

EBay Inc.'s (EBAY) fourth-quarter net income fell 31% on falling revenue and
slumping margins as the company's experienced a "tough and competitive" holiday
season.   The online auctioneer also issued a first-quarter view below analyst
estimates.   Following the results, eBay's shares dropped 5.8% to $12.51 in
after-hours trading, after closing up 5.8% in the regular session.   The
company reported net income of $367.2 million, or 29 cents a share, down from
$530.9 million, or 39 cents a share, from a year ago.   Excluding items,
earnings fell to 41 cents from 45 cents.   Revenue dropped 6.6% to $2.04
billion, its first quarterly revenue decline in at least this decade.   In
October, the company had estimated earnings excluding items of 39 cents to 41
cents on revenue of $2.02 billion to $2.17 billion.   EBay's gross margin fell
to 71.5% from 76.8%.   Gross merchandise volume decreased 12% during the
quarter
(Dow Jones Newswires 04:56 PM ET 01/21/2009)

More:
http://cs.schwab.com/

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Kal

Wed Jan 21 22:10:10 2009

You reap what you sow.

Lets hope some heads roll.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Go Figure

Wed Jan 21 23:25:58 2009

I am sick and tired of hearing about how listings have increased.  That is such a fallacy! Listings increased when eBay went to fixed price 30 days for $.35.  Out came listings from store into core and listings increased dramatically at that point.  Diamond sellers did not list anywhere near enough to cause that much increase.  Those listings were already on eBay, but were not being counted because store listings are not included in listing counts.  I would say that overall listings including store listings are probably down tremendously.  In addition Best Match and 10 item per seller per page limitation is severely affecting sell through.  Until Donahoe figures out what his problems are, listings will continue to decline, sell through will decline further and sellers will continue the mass exodus.  I am so amazed that he is this ignorant. It doesn't take a scientific genius to see what the problems are.  Or maybe he's just that arrogant and will see the ship sink before stopping the insanity and admitting he was wrong.  Someone needs to stop this mad man!!! Please!

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Sandy purins needs a new job

Wed Jan 21 23:45:20 2009

Excellent work, donuthole, even the Cheerleaders on Ebays board, like Sandy P are starting to say they are not all gung ho for paperless payments:) And after FORCING everyone on Ebay to accept Fraudpal, you would think Paynotmypal would show better than a measly 11% growth. Good job, John first revenue decline in Ebay history, due to John Donahoe & his stupid policies. Not everyone needs their hand held, and if I were only a buyer, I would never turn over personal info to an unlicensed unregulated well known accomplice to theft, Paypal. I still don't understand why no smart lawyers are filing class action suits against Paypal on behalf of all the sellers who Paypal has STOLEN funds from by aiding & abetting criminal activities on Ebay. It's actually sad, until last March, I was gungho for Ebay, right now I have nothing but anger & disgust at the mention of Feebay or Paypig. FIRE DONAHOE NOW!

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: Matt Price

Thu Jan 22 01:22:32 2009

I said nearly a year and a half ago that eBay is no longer a bellweather of the industry.  

In fact, eBay is no longer fun.  Not because of the fraudulent sellers, as eBay will make you believe, but because when a customer goes to the site, there is a million "Buy It Now" buttons and no auction buttons.

Clients that used to love eBay are telling me that the number of listings is over the top by corporations and big vendors who have more than 2,000 at a time.

They moved on to other venues.  And I don't blame them.  I think I have listed about 12 items on eBay this year, where I used to list about 1,200 for the entire year.

eBay Reports Fourth Quarter 2008 Results   eBay Reports Fourth Quarter 2008 Results

by: jay

Thu Jan 22 01:40:48 2009

Ebay lost money in 4Q even though they had 10 million more listings than last year.

Ebay lost money even though they forced everyone to use paypal only.

They lost money even though they still had the most traffic of any other retailer.

They lost money even though it was the Christmas season.

They lost money, but most other smaller ecommerce sites are reporting record gains.  Etsy, Bonanzle, manion, etc all reporting record breaking profits in 2008 over 2007.

All signs point to the fact that the buyers looked, but chose to buy elsewhere. Could it be because they advertised all year long about how they have had to put systems in place for their bad sellers?  Could it be because they limited exposure of sellers items in search to no more than 10 per page?  Could it be because they were manipulating what the buyer saw in search (the infamous rolling black out theory)?  Could it be because of duplicate listings from the same seller not showing up in search?  Could it be making sellers pay more to be seen on other countries ebay listing searches?

Or maybe it is just because no seller in their right mind would build a business on a platform that would suspend them with absolutely no warning at any time for poorly defined and implemented rules that change weekly?

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