Associated Press
EBay 2Q Earnings
Beat Analysts' Estimates
Wednesday July 21, 6:36 pm
ET
By Rachel Konrad, AP Business Writer
Surge in Int'l Sales Help EBay Post Second-Quarter Earnings That Beat Wall Street Expectations
But risks associated with overseas e-commerce -- including uneven seasonal shopping trends and competition from foreign rivals -- shook investors' confidence in eBay, one of the most stable dot-com stocks.
For the three months ended June 30, the online auction giant earned $190.4 million, or 28 cents per share, compared with $91.9 million, or 14 cents per share in the same period of 2003. Excluding special items, eBay earned $197.7 million, or 29 cents per share, up from $103.1 million, or 16 cents per share, in the first quarter of 2003.
The San Jose, Calif.-based company reported second-quarter revenue of $773.4 million, up 52 percent from the same period last year.
Analysts were expecting eBay to earn $185.4 million, or 27 cents per share, on sales of $769.46 million.
In the first half of 2004, eBay earned $390.5 million, or 58 cents per share, compared to $196.1 million, or 30 cents per share, in the first half of 2003. Revenue for the first half was $1.53 billion, compared to $985.8 million in the same period last year.
The company -- considered one of the most financially conservative in Silicon Valley -- slightly boosted its outlook for the rest of the year. The company now expects 2004 sales as high as $3.185 billion, $35 million higher than it previously predicted.
EBay's transaction revenue in the United States last quarter was $319.1, up 32 percent from the same quarter of 2003. International transaction revenue in the same period surged 76 percent, to $273.7 million.
EBay executives said they based their optimistic outlook for the rest of the year on the strength of the company's PayPal payment transaction division, and eBay's fledgling operations in China, India and other international markets.
But analysts worried that foreign operations exposed the company to currency swings; the added cost of offices and employees in foreign countries; and expensive ad campaigns in numerous languages. Overseas competition could come from rivals such as Sunnyvale, Calif.-based Yahoo Inc., which is aggressively expanding in China, or foreign startups.
Increased international sales also expose eBay to heightened seasonality -- monthly revenue fluctuations that investors generally dislike. In Europe, summer vacations bring e-commerce to a near halt. In Asia, storms or power outages can dent sales for weeks.
Chief executive Meg Whitman, who fielded numerous questions from analysts about seasonality during a conference call Wednesday, acknowledged that European vacationers made the second quarter relatively sluggish.
"There's no question seasonal trends are becoming more pronounced as eBay becomes more mainstream," Whitman said.
Investors were also concerned that limited Internet access would stymie eBay's potential for at least a year in China and India -- two markets eBay has targeted for rapid expansion.
"We think India is more of a 2006 than a 2004 story for eBay, but we think the company is doing the right thing to track down these growth opportunities," Mark Mahaney of boutique investment bank American Technology Research wrote in a report this week.
Last month, Ebay announced a $50 million acquisition of Indian auctioneer Baazee.com, India's most popular online shopping site. India has more than 1 billion people but 4 million Internet connections. Relatively few Indians have credit cards, which are used by more than half of eBay's shoppers.
Investors tend to reward companies with consistent revenue and shy from those with quarterly peaks and valleys. But Morgan Stanley analyst Mary Meeker said seasonal fluctuations could mean even bigger holiday sales later this year.
"We're pretty optimistic about the fourth quarter generally for e-commerce," Meeker said.
Investors have expressed concern for several quarters about growing operating expenses at eBay -- once considered among the leanest dot-coms.
On Wednesday, the company reported that "general and administrative" expenses -- payments to some accountants, lawyers, consultants and technologists -- swelled to $102.9 million, up from $69.5 million in the same period of 2003.
"We've been focused not just on visible things, such as sales and marketing, but on internal infrastructure -- accountants, lawyers, etc.," said CFO Rajiv Dutta. "It's legal expenses and consulting related to systems conversions."
