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eBay tumbles despite beating 3Q estimates

eBay Inc. (Nasdaq: EBAY) shares plunged 15 7/16, or 10 percent, to 136 9/16 Wednesday, one day after it slipped past Street estimates in its third quarter.

In the quarter, the Internet auctioneer pocketed $3.2 million, or 2 cents a share, on sales of $58.5 million.

First Call consensus expected it to earn 1 cent a share in the quarter.

On Wednesday, Deutsche Banc Alex. Brown cut the stock from a " buy" recommendation to "market perform" while Sands Brothers cut it from a "buy" to a "neutral" rating.

The $58.5 million in sales marks a 169 percent improvement compared to the year-ago quarter when it earned $1.8 million, or 2 cents a share, on sales of $21.7 million

"In the third quarter of 1999, eBay continued to record strong increases in gross merchandise sales and registered users," said CEO Meg Whitman in a prepared release. "The eBay community now transacts almost $3 billion per year on an annualized basis on our site."

A survey of analysts by First Call Corp. pegged eBay for third-quarter sales of $57.5 million.

eBay executives said they were "generally comfortable" with top and bottom line forecasts for the fourth quarter and year ahead. They said they might evaluate revenue guidance based on new initiatives. eBay will continue to invest in infrastructure to prep for a seasonally strong first quarter, executives said.

First Call consensus expects eBay to earn 11 cents a share in the fiscal year.

In the third quarter, the total gross merchandise sales on eBay's site rose to $741 million, up 280 percent from the $195 million it recorded in the year-ago quarter.

BancBoston Robertson Stephens expected total gross merchandise sales of around $718 million while Goldman Sachs had predicted sales of $765 million.

eBay grew its base of registered users to 7.7 million in the quarter, up 509 percent from the 1.3 million it had in the year-ago quarter. Last quarter, eBay had 5.6 million registered users.

In the quarter, it hosted 36.2 million auctions, up from 9.2 million in the same period last year and the 29.4 million auctions it handled in the second quarter.

Last quarter, eBay slipped past analysts' estimates, earning $5.1 million, or 4 cents a share, on sales of $49.5 million.

Operating expenses shot up from $15.5 million in the year-ago period to more than $46 million this quarter, mainly as result of increased spending on personnel and contractors.

After a flurry of service outages, Whitman vowed to ramp up add more equipment and employees to prevent similar setbacks in the future.

eBay shares rallied up to a 52-week high of 234 in April after trading at just 19 9/16 last October. The stock split 3-for-1 in March.

Eighteen of the 21 analysts following the stock maintain either a "buy" or "strong buy" recommendation.

-- Larry Dignan contributed to this report.