Titan Faces Challenges With Slowing Growth At Flagship Business
EBay Inc.'s first-quarter profit climbed 22% and revenue increased 24%, propelled by its flagship online auction business and its Pay Pal electronic-payments unit.
The San Jose, Calif., company also raised its forecast for 2008 revenue and earnings, surpassing Wall Street estimates. EBay expects revenue for the full year in the range of $8.7 'billion to $9 billion, up fr9m the mean forecast by analysts surveyed by Thomson Financial of $8.79 billion. EBay also said it expects earnings, excluding items, of $1.70 to $1.75 a share.
The report marks John Donahoe's debut as chief executive of eBay and the first since he introduced in February big structural changes-such as better customer service and a different fee structure-aimed at rejuvenating the company's flagship auction site. While those policy changes helped somewhat to generate higher revenue, the company said revenue growth in its main auction business unit was driven primarily by advertising, elassifieds and the online-ticketing unit Stub Hub, rather than by expansion in core auction sales.
Revenue exceeded Wall Street's forecast of $2.07 billion and surpassed eBay projected range of $2 billion to $2.05 billion.
While revenue from the flagship auction business rose 19% to $1.48 billion and new listings rose 10%, eBay's active users rose 1%, its slowest-ever growth rate.
The revenue growth rate is down from 23% a year earlier. And early feedback from merchants offers a mixed picture of how the changes are affecting them; some sellers are concerned that buyers haven't returned to the site.
"The noncore businesses performed better but there are certainly challenges in the core [auction business]," said Jeetil Patel, a Deutsche Bank Securities analyst.
The company's PayPal electronic-payments unit had a strong quarter. Revenue rose 32% to $582 million as PayPal did more business with merchants such as JetBlue Airways Corp. Skype, eBay's Internet-calling business, generated revenue of $126 million, up 61%.
Ebay's forecast for the current quarter, which ends in late June, essentially matched analysts' expectations. The company said it expects revenue in the range of $2.1 billion. It projected earnings, excluding items, of 39 cents to 41 cents a share.
