eBay enjoys 10 per cent profit rise

SAN FRANCISCO - Online marketplace eBay today posted a better-than-expected 10 per cent rise in third-quarter profit that reflected a modest pick-up in its core auctions business, sending its shares up 2 per cent.

The company forecast 2007 revenue below Wall Street forecasts but also said operating profits would increase faster than sales.

EBay has been taking steps to reinvigorate growth in its core auctions business, while expanding into new markets like fixed-price offerings that compete with Amazon.com Inc. and by adding new payment and communications features to its e-commerce sites.

"Despite some bumps, 2006 is exactly the evolutionary year that we thought it would be," President and Chief Executive Meg Whitman told investors on a conference call following the report.

Shares of eBay rose 2 per cent to US$29.10 ($44.41) after the report, reversing a 1 per cent decline in regular session trade on Nasdaq. The stock has lost about one-third of its value this year, weighed down by concerns about slowing growth.

Net income in the third-quarter grew to US$281 million, or US20 cents per diluted share, compared with the year-earlier quarter's US$255 million, or US18 cents a share, and topping the Wall Street consensus of US17 cents, based on Reuters Estimates.

Adjusted for stock-based compensation, amortisation and other charges, eBay earned US26 cents per share, compared with a Wall Street consensus of US24 cents.

Net revenue rose 31 per cent to US$1.45 billion thanks to a modest rebound in auction markets late in the quarter and continued strong growth in its PayPal online payments unit.

Wall Street analysts had expected US$1.43 billion on average, according to Reuters Estimates.

Auction listings were weak in July but system changes in August to encourage more auction rather than fixed-price purchases led to a re-acceleration in September that has continued into the fourth quarter, Chief Financial Officer Bob Swan said.

EBay projected fourth-quarter net earnings per share in a range from US21 cents to US22 cents per diluted share, including US3 to US4 cents of option expense. Excluding option expenses and other items, the company projected a profit of US27 cents to US28 cents a share.

The San Jose, California-based company sees fourth-quarter revenue in a range of US$1.62 billion to US$1.68 billion. Wall Street was looking for revenue in the year-end quarter to range from US$1.60 billion to US$1.73 billion, according to Reuters Estimates.

Looking into 2007, the company projected revenue growth of 17 per cent to 21 per cent, which is a marked deceleration from the 25 per cent consensus growth rate among Wall Street analysts surveyed by Reuters Estimates.

"Nothing's falling apart. It's a mid-20 per cent grower now and that's not what it was," said analyst Martin Pyykkonen of Global Crown Capital.

The company also said operating margins would expand by at least 0.5 percentage points in 2007.

EBay said in the third quarter it repurchased US$667 million worth of stock, or one-third of its previously announced stock buyback programme, at prices that averaged about US$27.79.

- REUTERS