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Wed Apr 21 2010 16:29:57

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

By: Ina Steiner

Sponsored Link

eBay's conference call with analysts is at 5:00 pm Eastern today, here is the company's press release announcing first quarter results for 2010, you can view full release with table's on eBay's investor website.

Updated: See also "eBay Marketplaces GMV up 6% in U.S. in 1st Quarter YoY" (link to article), and "eBay CEO Says Stores-in-Core Will Take 2-3 Quarters to Play Out" (link to article).

SAN JOSE, Calif.--eBay Inc. (Nasdaq:EBAY) today reported financial results for its first quarter ended March 31, 2010. The e-commerce company posted first-quarter revenue of $2.2 billion, up 9% year over year, or up 18% excluding Skype. The increase was due to growth in the Payments and Marketplaces businesses, as well as a positive impact from foreign currency movements against the U.S. dollar. The company recorded net income on a GAAP basis of $397.7 million or $0.30 per diluted share, and non-GAAP net income of $554.2 million or $0.42 per diluted share for the first quarter of 2010.



GAAP operating margin increased to 22.2% for the quarter, compared to 20.9% for the same period last year. Non-GAAP operating margin decreased slightly to 30.6% for the quarter, compared to 30.7% for the same period last year, as productivity gains were offset by faster growth in the company's lower margin PayPal business and lower take rates.

eBay Inc. generated $418.3 million of operating cash flow and $266.0 million of free cash flow during the first quarter. Operating cash flow and free cash flow were reduced by a one-time tax payment of $207.4 million related to a legal entity restructuring, as a result of which the company moved approximately $1.1 billion in cash to the U.S. in the fourth quarter of 2009.

"Our first quarter results reflect another strong step toward achieving our three-year growth and profitability goals," said eBay Inc. President and CEO John Donahoe. "We are becoming a more customer-focused and technology-driven company, delivering more innovative products and experiences and driving operating efficiencies to reinvest in growth. We are improving the fundamentals of our business, strengthening eBay Marketplaces and aggressively growing PayPal to become the leader in global online payments."
                                  
Business Unit Discussion

Payments Business Delivers Record First Quarter Performance and Expands Global Footprint
The Payments business unit reported $21.3 billion in net total payment volume (TPV) for the quarter, an increase of 35% year over year. Revenue for the quarter was $809.3 million, an increase of 26% year over year. The growth in revenue and net TPV was driven primarily by continued momentum in PayPal's Merchant Services business and growth on the eBay platform. PayPal continued to increase its penetration on eBay and across other e-commerce platforms around the globe. The Payments business remains focused on consumer and merchant adoption on and off eBay, expansion of PayPal’s open platform initiative and the ongoing integration of Bill Me Later.

Other Q1 Payments Business Highlights:
    * Entered into a new payment services agreement with China UnionPay (CUP), which will provide international retailers with access to customers holding more than 2.1 billion CUP cards.
    * Signed a deal with Facebook that allows users to select PayPal to buy virtual goods in the Facebook gift shop. Businesses around the world can also launch marketing campaigns on Facebook and pay with PayPal.
    * Launched new "Send Money" app for the iPhone®, which was downloaded more than one million times in less than three weeks. The app features conveniences such as "bump" money transfers and split check and collect money features.
    * Since the launch of PayPal X in Q4 2009, thousands of developers have signed up on X.com and have built hundreds of apps that have already generated more than $30 million in TPV.

Marketplaces Performance Reflects Continued Turnaround Momentum
The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, eBay Classifieds and other e-commerce sites, recorded $13.4 billion in gross merchandise volume (GMV) excluding vehicles for the quarter, a 24% year-over-year increase. The Marketplaces business unit benefited from the acceleration of growth in sold items driven by eBay's fixed-price format, and from the inclusion of Gmarket. Revenue was $1.4 billion for the quarter, a 13% increase compared to the first quarter of 2009. The year-over-year increase was due primarily to growth across all of the company's e-commerce businesses, as well as the inclusion of Gmarket and the positive impact from foreign currency movements against the U.S. dollar. Marketplaces benefited from growth both in its domestic and international business, which accounted for approximately 60% of Marketplaces revenue for the first quarter. The Marketplaces business will continue to focus on trust, value and selection in its core business, driving GMV growth, and expanding alternative formats including classifieds.

Other Q1 Marketplaces Business Highlights:
    * Aligned eBay's success with sellers of all sizes with free auction listings and dramatically reduced listing fees for fixed-priced items in the U.S.
    * Rolled out eBay Buyer Protection in the U.S. and U.K., providing a new level of customer support and trust, including an offer to cover a buyer's purchase price and original shipping for most purchases should a problem arise and the seller is unable to resolve the issue.
    * Launched three new buying and selling mobile applications including an eBay app for the iPad, which delivers a visually compelling experience to browse the vast selection of products on eBay. eBay's popular iPhone shopping app has been downloaded more than 8.5 million times since Q3 2008.
    * Introduced Fashion.ebay.com, a new shopping destination for clothing, shoes and accessories that showcases the breadth of new, vintage, branded and designer merchandise available on eBay.

Other Selected Financial Results
    * Taxes - The GAAP effective tax rate for the quarter was 20%, compared to 19% for the first quarter of 2009. The non-GAAP effective tax rate was 22% for the first quarter of 2009 and 2010.
    * Cash and cash equivalents and non-equity investments - The company's cash and cash equivalents and non-equity investments portfolio totaled $5.4 billion at March 31, 2010, compared to $5.2 billion at December 31, 2009.

Business Outlook
    * Second-quarter 2010 - eBay estimates net revenues in the range of $2.15 billion to $2.20 billion, representing growth of 11% to 14% excluding the 2009 impact of Skype. The company also estimates GAAP earnings per diluted share in the range of $0.27 to $0.29 and non-GAAP earnings per diluted share in the range of $0.37 to $0.39, representing growth of 9% to 15% excluding the 2009 impact of Skype.
    * Full-year 2010 - eBay estimates net revenues in the range of $8.8 billion to $9.1 billion, representing growth of 9% to 12% excluding the 2009 impact of Skype. The company also estimates GAAP earnings per diluted share in the range of $1.29 to $1.34 and non-GAAP earnings per diluted share in the range of $1.63 to $1.68, representing growth of 11% to 14% excluding the 2009 impact of Skype.

Quarterly Conference Call
eBay will host a conference call to discuss first quarter 2010 results at 2p.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.ebayinc.com. In addition, an archive of the webcast will be accessible through the same link.

About eBay Inc.
Founded in 1995 in San Jose, Calif., eBay Inc. (NASDAQ:EBAY) connects millions of buyers and sellers globally on a daily basis through eBay, the world's largest online marketplace, and PayPal, which enables individuals and businesses to securely, easily and quickly send and receive online payments. We also reach millions through specialized marketplaces such as StubHub, the world's largest ticket marketplace, and eBay classifieds sites, which together have a presence in more than 1,000 cities around the world. For more information about the company and our global portfolio of online brands, visit www.ebayinc.com.

Non-GAAP Financial Measures
This press release includes the following financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission, or SEC: non-GAAP net income, non-GAAP net income excluding Skype, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate, and free cash flow. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. For a reconciliation of these non-GAAP financial measures to the nearest comparable GAAP measures, see "Non-GAAP Measures of Financial Performance," "Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin," "Reconciliation of GAAP Net Income to Non-GAAP Net Income and Non-GAAP Net Income Excluding Skype," "Reconciliation of GAAP to Non-GAAP Effective Tax Rate," "Reconciliation of Operating Cash Flows to Free Cash Flow" and "Business Outlook" included in this press release.

Forward-Looking Statements
This press release contains forward-looking statements relating to, among other things, the future performance of eBay and its consolidated subsidiaries that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding expected financial results for the second quarter and full year 2010, the focus of the Payments and Marketplaces business units going forward and future growth in the Payments and Marketplaces businesses. The company's actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Factors that could cause or contribute to such differences include, but are not limited to: the further impact of the credit crisis, continued or worsening economic downturn and other changes in political, business and economic conditions, including any conditions that affect consumer confidence or e-commerce growth; fluctuations in foreign exchange rates; the company's ability to profitably integrate, manage and grow businesses that have been acquired recently or may be acquired in the future; the company's need to increasingly achieve growth from its existing users, particularly in its more established markets; the company's ability to deal with the increasingly competitive e-commerce environment, including competition for its sellers from other trading sites and other means of selling, and competition for its buyers from other merchants, online and offline; the company's need to manage an increasingly large enterprise with a broad range of businesses of varying degrees of maturity and in many different geographies; the effect of management changes and business initiatives; the company's need and ability to manage other regulatory, tax and litigation risks as its services are offered in more jurisdictions and applicable laws become more restrictive; any changes the company may make to its product offerings; the competitive, regulatory, credit card association-related, and other risks specific to PayPal and Bill Me Later, especially as PayPal continues to expand geographically and grow its open platform initiative; the company's ability to upgrade and develop its systems, infrastructure and customer service capabilities at reasonable cost; and the company's ability to maintain site stability and performance on all of its sites while adding new products and features in a timely fashion. The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed after the date hereof.

More information about factors that could affect the company's operating results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company's Investor Relations web site at http://investor.ebayinc.com or the SEC's web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the company on the date hereof. eBay assumes no obligation to update such statements.




Comments (115) | Permalink

Readers Comments

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Think about it

Wed Apr 21 17:02:49 2010

Gee I hate to be the first to say but

I TOLD YA SO. Ebay will make money in spite of themselves.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Ron

Wed Apr 21 17:12:22 2010

I said it last quarter, and I'll say it again - do not underestimate "the positive impact from foreign currency movements against the U.S. dollar", especially given that 60% of the business is non-US based.  Also, the growth of StubHub and other marketplace businesses other than the core eBay marketplace probably had a positive impact.  Given everyone's experiences documented here and the decrease in traffic stats, it's really difficult to believe that the core marketplace is really turning around.  We'll never know though until segmented numbers for the core marketplace are issued, which I guess is unlikely to ever happen.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Hardrock Rules

Wed Apr 21 17:14:09 2010

Don't make me vomit ! Apparently only the Diamonds are doing well at the smaller sellers expense ! Gold Power Sellers down to the small guy, LESS TRAFFIC, LESS WATCHERS, LESS BIDS ON AUCTIONS ( if any at all ). Weak FIXED PRICE sell through rate.

Nuff said, we are not wanted and I can't wait till my Creator shows me another way outside of dEcaybay!

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Fruity This user has validated their user name.

Wed Apr 21 17:34:29 2010

I wonder how much of that revenue is there once you take out the reserves, holds and not paying defrauded buyers AND INDIA.

Only ebay gets to use the funds on their sheets. hedging!

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Greg

Wed Apr 21 17:59:02 2010

''We are becoming a more customer-focused and technology-driven company, delivering more innovative products and experiences and driving operating efficiencies to reinvest in growth.''

Don't you mean a more buyer &/or antiseller-focused company?

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: old timer

Wed Apr 21 18:15:22 2010

''Aligned eBay's success with sellers of all sizes with free auction listings and dramatically reduced listing fees for fixed-priced items in the U.S.''

My listing fees for fixed price (which has to include my previous store inventory) nets out at a 130% INCREASE.  Period.  There is no way of getting around that fact, regardless of how eBay spins it and I'm tired of hearing this lie/half-truth.  And the increased exposure sure hasn't resulted in a 130% in sales.

Obviously, after more than 10 years, I am not the type of seller who fits in eBay's future plans.  So be it.  Change is inevitable, but this is a change I hate to see.  Not one I can do anything to alter, I understand, but not one I approve of.

Like a lot of sellers, I no longer have any choice but to seek business life beyond eBay.  Hopefully other sellers can figure out how to make eBay a profitable part of their business (although I strongly advise that you diversify beyond so as not to be solely at eBay's power).

Regardless of where you stand and where you end up, I wish good luck to all of us sellers in 2010.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: ebay_universe
Web Site

Wed Apr 21 18:47:11 2010

{Think about it
       
Wed Apr 21 17:02:49 2010
Gee I hate to be the first to say but

I TOLD YA SO. Ebay will make money in spite of themselves.  
}

Brilliant! Link that prediction here.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

This user has validated their user name. by: Mercy the Mingless

Wed Apr 21 18:53:37 2010

''Aligned eBay's success with sellers of all sizes with free auction listings and dramatically reduced listing fees for fixed-priced items in the U.S.''

DRAMATICALLY REDUCED LISTING FEES!!!

Donahoe is delusional.  There is no other explanation.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: BKB

Wed Apr 21 19:18:32 2010

Delusional...

eBay Stock

26.29  -0.11 (-0.42%)

After Hours: 24.15 -2.14 (-8.14%)

Apr 21, 7:00PM EDT  

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Harriet This user has validated their user name.

Wed Apr 21 19:28:40 2010

Jeetil Patel says "sell" eBay.

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/04/
21/bloomberg1376-L1913B1A1I4H-3.DTL

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Janice

Wed Apr 21 19:59:18 2010

I'm looking to connect with 50,000 unhappy e-bay sellers who will commit to moving to e-bid on May 15, 2010, e-mail at least 20 friends or family members advising them that your moving your business, not buy or sell on e-bay for at least 90 days.  Contact me at    stopcomplainingandfightback@yahoo.com  

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: On Lies and Secrets This user has validated their user name.

Wed Apr 21 20:47:04 2010

Great article Harriet.

From Marketwatch: http://www.marketwatch.com/story/ebay-expected-to-deliver-modest-earni
ngs-growth-2010-04-21

''While
the PayPal unit delivers stronger revenue growth, the marketplace business brings higher margins, which analysts say is crucial to the company's overall profitability performance.

'Given that eBay's marketplace accounts for over 80% of overall profits, it has to grow its marketplace segment in line with overall e-commerce without a significant hit to operating margin,' wrote Citi analyst Mark Mahaney in a note to clients last week.''

In the first part of the press release, it looks like they were lumping payments and marketplaces together.  Further down, under a discussion of the business units, they lead with a discussion of payments.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: J.G.

Wed Apr 21 20:51:44 2010

Thank you, Harriet, for that wonderful link:

 ''Traders who took Deutsche Bank AG analyst Jeetil Patel's advice today and bet against EBay Inc. profited when it plunged 8.8 percent on disappointing results.''

AND:  ''EBay Chief Executive Officer John Donahoe is entering the third year of a turnaround effort to revive growth in the company's main Marketplaces site. He expanded inventory, improved fraud protection for buyers and steered the company away from auction sales. Those changes haven't stemmed consumer defections to Amazon.com Inc., according to Citigroup.''

And, finally:

''Our recent checks with sellers suggest that the first two weeks of April have been exceptionally weak from a sales standpoint,'' Patel wrote in a report released today before eBay's announcement.

Sounds like someone is out there listening and watching.  How does this account gel with the other blather we've been subjected to?  It's refreshing that someone actually mentioned 'the sellers.' This whole article made my day.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

This user has validated their user name. by: Mercy the Mingless

Wed Apr 21 20:52:26 2010

From John Donahoe in today's ebay Earnings Call transcript.

"Then for the smaller business seller or people that sell a lot of volume on eBay we are incenting them to sell in the fixed price format, making that in essence free or quite low price to list in a fixed price format. Again, they only pay if it sells. As you know, auctions are sorted by time ending soonest. Fixed price is sorted or searched by in essence relevance or best match."

Two lies.  One sentence.  Can see what makes him executive material.

Donahoe is delusional.  There is no other explanation.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Doris Knight

Wed Apr 21 21:01:50 2010

Did they get their recipe for cooking the books from the Food Network? Any skilled accountant (read: crooked) can juggle the numbers to meet the client's demands.

Smoke and mirrors, folks!

Come join me on Bonanzle! I'm taking the first step to eBay independence.

Oh sure... I'm still on eBay. I can't afford to leave. But it costs me nothing time to get my feet wet over at Bonanzle. It's still growing and doesn't yet have anywhere near eBay's traffic (or name recognition), but where the Sellers GATHER, the Buyers will FOLLOW!

When Bonanzle hits the tipping point and Buyers start to discover it, I hope you'll be there will be to reap the rewards!

eBay doesn't want or need me, and in time (and with luck) I won't need them either. --- It's like breaking a bad habit...quitting cigarettes. Cold turkey is too hard, so I'll ease up a little at at time...find a substitute and replacement and move on when the time is right.

Good luck everyone! We deserve better than this!

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: J.G.

Wed Apr 21 21:13:37 2010

Ming, tell me more!

So this means as a small seller, I'll be able to list fixed price FREE or quite low and I only pay the listing price if it sells. Oh, that's a good idea.  Oh and auctions are listed by 'ending soonest'.  Oh, are they now changing the default for auctions? And they no longer intersperse the auctions with all of the 'relevant' best match fixed price items. Oh, and relevance and best match don't involve placement pecking orders.  Oh, that's good.  This may be an alternate universe JD is discussing.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: tipping point

Wed Apr 21 21:19:30 2010

I also have issue with the following statement

"Then for the smaller business seller or people that sell a lot of volume on eBay we are incenting them to sell in the fixed price format, making that in essence free or quite low price to list in a fixed price format. Again, they only pay if it sells. "

I agree that fixed price listings are close to free insertion IF you list multi variations. One listing (one item, but high inventory) could sell in the thousands or more, yet that seller only paid 1 insertion fee.

But...that statement couldn't be further from the truth for the small seller and those sellers who sell unique and one of a kind items, they  pay insertion fees for each and every item individually. If they sell a thousand items, they pay for insertion on each and every one of those thousand. The risk and cost have increased have for the small seller and those offering unique or collectible items.

This is a HUGE tipping point, sellers with all the unique or individually listed items will move off eBay.  

It will be interesting if those sellers will be accepting PayPal. I doubt it.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Ron Smith

Wed Apr 21 21:23:22 2010

Ebay is making lots of money and they are going to continue to make lots of money. No matter how you feel about that, don't live in denial. Ebay is a powerful corporation that makes alot of money. Maybe they will never make as much as in past years, but it will still be billions and billions.

It's 2010 and the ebay of old is gone and never to return. Never.

In fact, if you as a seller are doing badly, it will probably only get worse.

Plan your exit strategy, it is the best thing you can do for yourself because ebay is going to continue to raise its fees, offer small sellers less exposure, and encourage more seller competion via Best Match to keep your prices low.

For a corporation like ebay, its like shooting fish in a barrel. Seller A quits and Seller B picks up their business. Ebay has always had too many sellers, so they will continue to get rich at your expense.


eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

This user has validated their user name. by: Mercy the Mingless

Wed Apr 21 21:25:16 2010

In a May 22, 2008 interview with Scot Wingo of ChannelAdvisor, John Donahoe was asked

Q: "What are you doing to accelerate eBay?"

He replied

A: "We are driving more changes than ever. There are no silver bullets, we’re testing in different geos, when we find things that work, we’ll do more of them and less of the ones that don’t."

Donahoe is delusional.  There is no other explanation.

eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket   eBay Q1: Marketplaces Benefits from Fixed Price, Gmarket

by: Let me tell you a story

Wed Apr 21 21:37:41 2010

RIP eBay
You are so 10 minutes ago.

But keep up the delusion of being a "technology-driven company" (with no shopping cart, and weekly glitches) "delivering innovative products" (but they have no products).  

Shouldn't eBay's press release start with "once upon a time" and end with "and they lived happily ever after" because it all just make believe.

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