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eBay outbids earnings estimates, splits stock

The company also reports that first-quarter earnings rose on increased interest and investment income, exceeding analyst expectations.

eBay today reported that its first-quarter earnings rose 67 percent, exceeding analyst expectations.

The company also announced a 2-for-1 stock split that will go into effect next month.

Net earnings for the period were $8 million, or 6 cents per share, excluding merger and other charges. For the same period in 1999, the company posted earnings of $3.8 million, or 3 cents a share.

Net revenue for the quarter was $85.8 million, compared with $42.8 million for the year-ago period.

Analysts expected eBay to earn 3 cents per share, according to a survey by First Call.

According to the company's report, the bulk of eBay's revenues came from "interest and other income," rather than from its actual operations. eBay's net income from operations was $452,000, compared with the $10.4 million the company earned on interest and investments.

For the year-ago period, eBay's net income from operations was $7.7 million, and its income from interest and investments was only $275,000.

For the quarter, eBay posted gross profit margins of 73 percent, down from 81 percent for the same period last year. A company's profit margin is the difference between what it charges for its goods or services and what those goods or services cost the company.

Despite the year-to-year drop-off, eBay's profit margins rose compared with the fourth quarter of 1999, when they stood at 71 percent.

Much of the difference in operating income was because of increased spending on product development and marketing. In a conference call with investors, eBay chief executive Meg Whitman noted the company's launch of its new Chinatown interest area and the expansion of its Billpoint payment system to all eBay sellers.

In addition, she said that eBay addressed past site stability problems and maintained 99 percent uptime through the quarter. Despite the increased spending on marketing, eBay spent only $13 to acquire each customer, Whitman said.

"In the first three months of the year, eBay was an execution machine," Whitman said.

Derek Brown, an e-commerce analyst with W.R. Hambrecht, praised eBay, saying he had expected the company to post a loss on operations because of its increased investments in improving site stability.

"They had a very good quarter," Brown said. "They have a consistently profitable business that they are building right now."

eBay shares rose $11.69 to $153.56 in regular market trading today. The online auction giant issued its earnings report after the close of regular trading. In after-hours trading, eBay shares were up more than $5.