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Wed July 21 2010 16:20:58

eBay Announces Second-Quarter Financial Results for 2010

By: Ina Steiner

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

eBay Inc. Reports Strong Second Quarter Revenue and Earnings Growth
SAN JOSE, Calif.-Global ecommerce and online payments leader eBay Inc. (Nasdaq:EBAY) today reported that revenue for the fiscal second quarter ended June 30, 2010, increased 6% to $2.2 billion, or 15% excluding Skype, compared to the same period of 2009. The company recorded second quarter net income on a GAAP basis of $412.2 million, or $0.31 per diluted share, and non-GAAP net income of $530.2 million, or $0.40 per diluted share, representing an 18% increase excluding Skype, compared to the same period of 2009.

    "Reconciliation of GAAP to Non-GAAP Effective Tax Rate"

The company's PayPal business delivered record second quarter performance. PayPal added a million new accounts each month during the quarter and its merchant services business continued to gain share in ecommerce. For three consecutive quarters, PayPal's merchant services business has grown by over 40% year over year. The company also reported that the multiyear turnaround of its eBay business continued on track in the second quarter, with strength in Europe, expected performance in Asia, slower than expected growth in the U.S. and progress against underlying customer metrics focused on trust, value and selection for the world's largest online marketplace.

"We delivered strong second quarter results, demonstrating the global strength and increasing diversity of our business," said John Donahoe, eBay Inc. President and CEO. "PayPal is strong and getting stronger, building a robust and innovative global footprint serving all of ecommerce. And our eBay turnaround remains on track, with strong performance in Europe, significant changes in the U.S. and continued improvements to the buying and selling experience. We continue to focus on delivering strong financial results, managing a healthy balance sheet and making the necessary investments to compete, win and satisfy our customers."

Second Quarter 2010 Financial Highlights (presented in millions, except per share data and percentages)


Other Selected Financial Results
    * Operating margin – GAAP operating margin for the second quarter increased to 21.9%, compared to 19.6% for the same period last year. Non-GAAP operating margin increased slightly to 29.1% for the quarter, compared to 28.7% for the same period last year, as productivity gains were offset in part by faster growth in the company's lower margin PayPal business.
    * Taxes – The GAAP effective tax rate for the second quarter of 2010 was 17%, compared to 20% for the second quarter of 2009. The non-GAAP effective tax rate was 21% for the second quarter of 2010, compared to 20% for the second quarter of 2009.
    * Cash flow – The company generated $726.4 million of operating cash flow and $519.2 million of free cash flow during the quarter.
    * Cash and cash equivalents and non-equity investments – The company's cash and cash equivalents and non-equity investments portfolio totaled $5.6 billion at June 30, 2010, compared to $5.2 billion at December 31, 2009.

Business Outlook – Impact of Stronger Dollar

For the full year 2010, eBay expects its PayPal business unit to continue its strong performance, resulting in a positive impact to full year net revenues of approximately $100 million and $0.06 to $0.08 per diluted share. The company expects its Marketplaces business unit to continue its strong growth in Europe, offset by its slower growth in the U.S.

However, full year pressure from the stronger U.S. dollar, relative to other currencies, is expected to have full year negative impact on 2010 net revenues of approximately $250 million and $0.09 to $0.11 per diluted share.

As a result, the company is modestly adjusting full year guidance from that provided on January 20, 2010 and reaffirmed on April 21, 2010. The company now estimates full year 2010 net revenues in the range of $8.8 billion to $9.0 billion, representing growth of 9% to 11% compared to 2009, excluding Skype. The company also estimates GAAP earnings per diluted share in the range of $1.23 to $1.28 and non-GAAP earnings per diluted share in the range of $1.60 to $1.65, representing growth of 9% to 12% compared to 2009, excluding Skype.

Third quarter 2010 guidance includes the negative impact of pressure from a stronger U.S. dollar on net revenues and earnings on a year-over-year basis of approximately $70 million and $0.02 per diluted share. For the third quarter 2010, eBay estimates net revenues in the range of $2.13 billion to $2.18 billion, representing growth of 4% to 6% compared to third quarter 2009, excluding Skype. The company also estimates GAAP earnings per diluted share in the range of $0.26 to $0.28 and non-GAAP earnings per diluted share in the range of $0.35 to $0.37, representing growth of 0% to 6% compared to third quarter 2009, excluding Skype.

Quarterly Conference Call
eBay will host a conference call to discuss second quarter 2010 results at 2 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.ebayinc.com. In addition, an archive of the webcast will be accessible for 90 days 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 its global portfolio of online brands, visit www.ebayinc.com.

Update: In a conference call on Wednesday afternoon, eBay told analysts it would tweak U.S. search, and that it would launch new "tailored shopping expereinces" in the consumer electronics and auto parts categories after launching its fashion portal this year - see "eBay to Tweak U.S. Search after Domestic Market Disappoints in Q2" (link to article).




Comments (69) | Permalink

Readers Comments

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Digby
Web Site

Wed Jul 21 17:02:30 2010

Looks like a Paypal report rather than an ebay report.

Notice how Paypal comes first in every paragraph!

As I predicted, we are not seeing the mass decline in sales, there was a small growth in their US market and a larger growth Internationally.


eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Lisa Lisa Bo Bisa

Wed Jul 21 17:06:24 2010

You know what? English really IS my first language, but I don't understand much of what that says.

We need a translator.

I read it, but in my head it sounds like Charlie Brown's teacher talking.

This bit stood out, however: ''... slower than expected growth in the U.S. and progress against underlying customer metrics focused on trust, value and selection for the world's largest online marketplace.''

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: nadine

Wed Jul 21 17:17:48 2010

Yes, I'm listening to the conference call. The marketplace is definitely the red-headed stepchild, compared to Paypal. Donahoe has a bee in his bonnet about this stupid net promoter score metric. Does he even ask the question to his paying customers, the sellers? I've never been asked. Ask a stupid question, get a useless response.

GMV grew only 2% on eBay.com. All the marketplace growth is international. The US site is a boat anchor. Amazon will be announcing stupendous GMV growth tomorrow, probably over 60%, if the Scott Wingo's ChannelAdvisor clientele are any guide.

Donahoe says he's not satisfied, but is on top of it. Um, didn't he say that two and a half years ago?

What he's also not mentioning is that Q2 2009 was not strong for eBay, so they have easy comparisons this quarter.

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Andrew

Wed Jul 21 17:24:37 2010

Basically it says that all operations of Ebay are doing very well except for one area--the US marketplace. The international marketplace grew about 20% and the US marketplace about 2%. People should take a lesson from Ebay and do what they do best(besides screwing people)--diversify your revenue streams.  

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Atlas Shrugged

Wed Jul 21 17:53:56 2010

They're making it all work via fees and PayPal hold scams.

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: JoeS

Wed Jul 21 17:59:50 2010

@ Atlas Shrugged

''They're making it all work via fees and PayPal hold scams.''

Yes, there was a big fee increase that quarter. I'm sure it helped the numbers. Couple this with the fact that traffic continues to decline and they are still squeezing more and more out of even less. Anyone with an ounce of business common sense understands this type of insane cycle is not sustainable.

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: another side of the coin

Wed Jul 21 18:00:35 2010

"Donahoe says he's not satisfied, but is on top of it."

Doesn't he mean behind it. All US sellers have been bending over since 2008.

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Sayonara Ebay

Wed Jul 21 18:11:25 2010

Andrew-- That's a greaat lesson to take out of all of this -- don't keep all of your eggs in one basket.  If US growth was only 2 percent -- who knows if ebay.com growth was even positive.  Don't forget, this includes StubHub which has been very successful, along with their other marketplace sites.  

The 2% includes all the advertising they placed on eBay to get buyers to go to off-eBay sites AND the ads they put on our listings wherever they can.  Advertising is a field where they have done very well.

It also includes the huge fee ''decrease'' that eBay foisted upon us. Until we know the REAL numbers for eBay CORE marketplace, what we know as ebay.com, we don't know anything

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Lips

Wed Jul 21 18:17:10 2010

Amazons numbers come out tomorrow. Any predictions? I predict Kindle sales have dropped off majorly since the launch of the Apple iPad. I also predict Amazon will not make excuses for lousy numbers since their marketplace is solid and strong with an actual vision behind the mission.

We'll see!

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: nadine

Wed Jul 21 18:22:59 2010

They mentioned that about 15% of Marketplace revenues were due to advertising. They also said that overall take rate was 8%, slightly down, which gives an indication how little the diamonds are paying. Donahoe also mentioned that it took about 18 months to tweak the Best Match results after they listed store in core in the UK and Germany, so he expects it will take about that long in the US -- meaning to get the velocity back to anywhere near where it was before April 1st.

Isn't it great working with a service provider whose attidtude is, 'it's our sandbox and we have absolutely no implied warrant of stability in the services we provide. If we feel like changing the sand for quartz rocks because they're prettier, we'll do it without warning.'?

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Charlie

Wed Jul 21 19:12:25 2010

May I be the first to say " I told you so way back in May."

Donahoe isn't going anywhere. So all the complaining has done exactly nothing.

Ebay is making money.

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Ebay's Slow Death This user has validated their user name.

Wed Jul 21 19:37:32 2010

Ebay may be making money, but I'm not.

I'm closing out my store and migrating to less expensive marketplaces. Ebay's fees have gotten so high and my sales so low, that it doesn't make any since for me to list there any longer, and work for free.

I'm tired of feeding the Ebay beast, and paying for Donahoe's million dollar a month salary. I'm not saying what any other Seller should do, I just can't make any money there anymore.  Staying, and hoping things will change, is stupid. I'm tired of being stupid.



eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Loops

Wed Jul 21 20:20:10 2010

Why do business owners feel they must list with a marketplace? Your own webstore is freedom. Freedom to drive your own traffic, freedom to communicate with better tools, freedom to adjust your store to change with the times.

Say NO to marketplaces and become a better advertiser. This was the reason why you became your own boss, right? When you are listed with a marketplace, you are no longer your own boss. You answer to the landlord.

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Ebay's Slow Death This user has validated their user name.

Wed Jul 21 20:36:48 2010

@Loops

Last year I signed up with a web hosting service, who said building a webstore on their site was easy.  After I paid for a year, I got my ''control panel'' and it was so complicated I never got around to learning how to create a web page. I got website building books and started reading, but gave up.

I sell used items, I am not a computer whiz. I can drive a car, but I don't know how to build one, and haven't got the time and patience to learn how.

I'm not dumb, but trying to build my own website seems overwhelming, and I can't afford to pay someone else to do it for me.

That is why I (and I suspect a lot of other Sellers) list on eCrater and Bonanzle. Listing takes all my time.

I truly admire people like you, who are tech minded, and can wade through all the details to build your own website!


eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: My Own Website Not Quite Paying My Bills Yet

Wed Jul 21 21:17:00 2010


To anybody trying to build their own website:

You might want to try other website building companies if you want to build your own website. Just because one didn't work for you doesn't mean the others won't.

You can also hire someone to build a website for you that will be easy to enter inventory. I'm sure that there are many other services that you pay people to do (dentist, mechanic, barber, etc.) to do things you can't do. Why would a website be any different.

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: suzie cutie

Wed Jul 21 21:22:55 2010

So eBay is growing in Europe but moving sideways in America. Could it be that American ingenuity has given rise to eCrater, Bonanzle,etc... and more and more sellers have their own website, whereas the Europeans are kind of stuck with eBay and not much else.
Donahoe is confronted with American sellers' resourcefulness and his insanities and lies will not save him.

Amazon is big in America but what's their reach in Europe?

Just a thought.

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by:

Wed Jul 21 21:31:01 2010

Dear Valued Sellers,
In order to prop up 3rd quarter earnings we are pleased to announce that the 15% FVF will be changed on 01 August.

The management team has decided that the 85% of each sale which our largesse has permitted you to keep is likely being misspent so we will now extract 85% of each sale (should you be fortunate enough to actually experience one) and permit you to spend the remaining 15% in any way you so choose.

We will let you know should circumstances dictate that we need to raise the FVF higher.

Thank you for being a valued member of the eBay Community of sharecroppers.

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: John
Web Site

Wed Jul 21 22:26:58 2010

I've been selling on ebay motors for close to 10 years. Something in their system is totally out of whack. My ebay sales have dropped 50 - 60 percent in the past 6 weeks. My listings, price and items have not changed, the ebay system has. I do not have this huge drop on my own site or on Amazon. March 2010 was my best month ever on ebay (in dollars and units sold), but now the wheels fell off. Go figure....

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

This user has validated their user name. by: permacrisis

Wed Jul 21 22:54:38 2010

Translation: "If we ditched Best Match today, there'd be a 60% jump in selltrhu. But we're too damn proud, so we'll tweak it instead."

eBay Announces Second-Quarter Financial Results for 2010   eBay Announces Second-Quarter Financial Results for 2010

by: Patricia This user has validated their user name.

Wed Jul 21 22:58:42 2010

So Donahoe is disappointed in the US marketplace figures and he's going to "gently tweak search" to give even more exposure to higher priced items and fixed price items.  This man sure is dense!  No other word for it - "blockhead" really fits.  When is he going to learn that the more he shuts out small sellers the more they will leave the site and take buyers with them?  Nobody is going to pay fees to be hidden in the listings!  The man is surely a lost cause....why oh why did he have to end up at Ebay???

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