Wednesday, January 23, 2008

EBay Shares Fall on Sales Forecast; Whitman Steps Down as Chief

By Chris Burritt

Jan. 23 (Bloomberg) -- EBay Inc., the world's largest Internet auctioneer, fell 5.3 percent after it forecast 2008 sales and profit that missed some analysts' estimates and said John Donahoe will succeed Meg Whitman as chief executive officer.

Fourth-quarter net income climbed 53 percent on gains from international auctions and increased revenue from its PayPal payment service, the online seller said today.

EBay may accelerate spending to market its U.S. auctions after U.S. revenue increased by 18 percent, half the rate of international growth. Whitman, 51, reduced listings and simplified searches in an effort to lure back buyers and sellers annoyed by cluttered sites selling merchandise from personal computers to coins.

``The focus over 2008 is going to be on improving the buyer experience as well as making the platform more useful for sellers,'' said Scott Devitt, an analyst at Stifel, Nicolaus & Co. in Manassas, Virginia. He recommends investors buy EBay shares.

The company projected full-year profit of $1.63 to $1.67 a share, compared with the average estimate of $1.67 in a Bloomberg survey. Sales in 2008 will be from $8.5 billion to $8.75 billion, less than the $9.04 billion estimated by analysts.

EBay fell $1.52 to $27.42 at 5:44 p.m. in trading after the Nasdaq Stock Market closed. Earlier, the shares climbed 6.7 percent. The stock has dropped 13 percent this year, following a gain of 10 percent in 2007.

Net Income

Net income in the quarter through December advanced to $530.9 million, or 39 cents a share, from $346.5 million, or 25 cents, a year earlier. Revenue climbed 27 percent to $2.18 billion, San Jose, California-based EBay said in a statement.

EBay's board authorized the buyback of an additional $2 billion in shares. The company spent $1.5 billion to repurchase 44.6 million shares in 2007.

Excluding some items, EBay earned 45 cents a share in the fourth quarter, better than the 41 cents estimated by analysts. They projected revenue of $2.14 billion.

EBay said it was the top e-commerce site in the U.S., U.K. and Germany during the holiday shopping season, citing data from Nielsen Online.

PayPal revenue climbed 35 percent to $562.7 million as the unit signed agreements with U.S. Airways and AirTran to use its payment service.

Economic Pressures

``EBay's facing economic pressures, and people are trying to figure out the impact on its growth rate,'' said Giri Cherukuri, who helps manage $1.1 billion, including EBay shares, at Oakbrook Investments in Lisle, Illinois.

New listings climbed 4.4 percent to 637.2 million from a year earlier, the first increase in three quarters. EBay acquired ticket reseller StubHub and Web recommendation site StumbleUpon last year to attract more customers.

Whitman said today on a conference call with investors and analysts that the company has a ``lot more work to do'' to spur auction sales.

``I've repeatedly said that 10 years was about the right amount of time for any CEO to stay at the helm of a company,'' Whitman said. ``Now that I've reached that milestone, I've decided that it's time for EBay to have new leadership, a new perspective and a new vision.''

She started her career in 1979 at Procter & Gamble Co. before moving on to stints at Stride Rite Corp. and Hasbro Inc., where she was responsible for marketing toy brands Playskool and Mr. Potato Head, according to Whitman's biography on EBay's Web site.

Bain Consultants

Whitman also worked at Bain & Co., a consulting firm from which she hired Donahoe three years ago to expand EBay's auction sites globally. He may move more aggressively than Whitman to cut costs, boost advertising and change auction fees to draw more users, said Jeetil Patel, a Deutsche Bank Securities Inc. analyst.

``Meg has done an amazing job, but every company goes through a life cycle,'' said Bob Concannon, head of the Silicon Valley technology practice for Boyden, a San Francisco-based executive search firm. ``If you look at the company's performance and the stock price, it has been lackluster in recent years.''

Whitman will remain on the EBay board. Donahoe will be replaced by Rajiv Dutta, head of Bay's PayPal unit.

EBay's largest acquisition, its $2.6 billion takeover of Internet telephone service provider Skype, hasn't delivered as Whitman predicted in 2005. She said Internet calling would encourage buyers and sellers to talk and spur auction revenue.

Instead, EBay took a charge last year of $1.39 billion on Skype, leading to the company's first quarterly loss since it went public in 1998.

Skype revenue climbed 76 percent to $115.4 million in the quarter. The Internet phone service reached an agreement with MySpace during the quarter.

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