EBay 2nd-Qtr Net Falls 70%, Revenue More Than Doubles (Update2)
EBay 2nd-Qtr Net Falls 70%, Revenue More Than Doubles (Update2) (Adds eBay's spending plans and earnings outlook.)
Seattle, July 26 (Bloomberg) -- EBay Inc., the No. 1 online auctioneer, said second-quarter profit fell 70 percent as it spent more to market its Web site and add staff and computer systems. Revenue more than doubled.
Net income fell to $816,000, or 1 cent a share, from $2.73 million, or 2 cents, a year earlier. Revenue rose to $49.5 million from $19.5 million.
The fast-growing Internet retailer has been promoting its site and making acquisitions to stay ahead of rivals Yahoo! Inc. and Amazon.com Inc. It said today it expects to continue spending on equipment, new businesses, international expansion and personnel for operations and customer support -- limiting any widening of its gross margin this year. ''Competition is always a concern,'' said Bruce Bartlett, portfolio manager at Oppenheimer Funds Inc., which held 24,482 eBay shares as of March. ''But in terms of the quality of the offering at eBay and the quality of the management, I'm confident they'll be able to maintain a strong leadership position.''
EBay, which closed at 104 3/8 in New York before the results were released, last traded at 100 on Instinet.
EBay said its profit before merger- and compensation-related expenses such as amortization was $5.1 million, or 4 cents a share, compared with $5.2 million, or 5 cents, a year earlier.
On that basis, eBay was expected to earn 3 cents, the average estimate of analysts polled by First Call Corp. Unofficial estimates ranged from 3 cents a share to 6 cents on EarningsWhispers.com, StreetIQ.com and WhisperNumber.com.
The company said it expects acquisitions and investments in its business to increase sales beyond analysts' forecasts for the online business. The company also said it expects to meet analysts' earnings forecasts for next year.
The San Jose, California-based company said it gave $3.9 million in credits to users after a computer-related problem forced it to suspend auctions for almost a full day.
The Business
Sales and marketing expenses at eBay more than tripled to $22.9 million, while general and administrative costs more than doubled to $10.1 million. It added a new computer system to back up its main system during an outage. It also built up its engineering staff and enhanced testing procedures. ''We've redoubled our efforts to invest in utility-like stability,'' Chief Executive Meg Whitman said.
Gross margin, or the percent of revenue left after subtracting the cost of goods sold, narrowed in the quarter to 78 percent from 83 percent a year earlier. The company said it expects gross margin to remain in the mid 70-percent range the rest of this year because of increased spending.
EBay, which doesn't sell merchandise itself, makes money by charging listing fees and collecting a royalty on each sale.
EBay, founded in 1995, has more than 2 million items listed for sale on its site. Yahoo, by contrast, has just over 500,000. Amazon.com has about 100,000 auctions, analysts said.
Competition
Still, eBay is vulnerable to competition, especially during service outages, analysts said. Its rivals also aren't limited to large companies such as Amazon.com. Many smaller companies are setting up niche auction sites that focus on one area, such as stamps or fishing gear, analysts said.
EBay said it had 5.6 million registered users as of June 30, an increase of 46 percent from the first quarter.
EBay announced a series of acquisitions during the quarter to increase its services in the face of growing competition.
It bought alando.de AG, Germany's largest Internet auction company, as part of its push to expand overseas. Its purchase of Butterfield & Butterfield Auctioneers Corp. added high-priced art and collectibles and marked one of the first times that an Internet company bought a traditional rival.
EBay also bought Kruse International, auctioneers of collectible cars, and Billpoint Inc., a payment-services provider that will let eBay users pay using their credit-cards.
EBay was the 17th most-visited Web site in June, with about 8.7 million shoppers who visited at least once, according to Media Metrix, which tracks Internet traffic.
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