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eBay misses slightly on revenue, but PayPal stays strong

The company's marketplace business continues to grow, despite a security breach in the spring, but it doesn't meet Wall Street's expectations for overall revenue.

Donna Tam Staff Writer / News
Donna Tam covers Amazon and other fun stuff for CNET News. She is a San Francisco native who enjoys feasting, merrymaking, checking her Gmail and reading her Kindle.
Donna Tam
2 min read


As eBay gets ready to spin off PayPal, its third-quarter earnings show just how much faster PayPal is growing than eBay's marketplace business.

eBay reported on Wednesday revenue of $4.36 billion with earnings of 68 cents a share, delivering mixed results. The company's reported revenue was just shy of Wall Street's estimates, while its earnings per share slightly beat expectations.

Analysts estimated revenue of $4.37 billion, with earnings of 67 cents a share.

Observers expected eBay's third quarter to show signs of a backlash from a cyberattack on user data, which happened the previous quarter. eBay's marketplace revenue rose by 9 percent, to $2.17 billion, in the second quarter, despite the cyberattack, which prompted the company to urge customers to change their passwords.

Marketplace sales continued to grow in the third quarter, up 6 percent from last year, despite concerns that the breach may have caused consumer confidence to wane. Net sales reached roughly $2.16 billion.

During a call following the release of the report, analysts asked about eBay's plans to spin off PayPal. The payment service continued to grow rapidly in the third quarter. Sales were up 20 percent, to $1.95 billion.

eBay CEO John Donahoe said he and Chief Financial Officer Bob Swan are working closely with the new leaders of the soon-to-be-two companies as the transition moves forward.

"We're going to try to do what's right for both businesses," Donahoe told analysts during a call following the earnings release. "The goal is to set each of these business up to succeed."

eBay, which bought PayPal for $1.5 billion in 2002, announced at the end of September that it's spinning off its PayPal business so the two units can run as individual companies. The move is meant to give both companies more flexibility to focus on their respective businesses. For eBay, this means increased attention to its retail and marketplace services. PayPal has been the fastest-growing part of its business, so the separation casts a spotlight on its core business.

eBay also lowered its forecast for the year, with revenue between $17.85 billion and $17.95 billion. It estimated fourth-quarter earnings of between $4.85 billion and $4.95 billion, with earnings per share between 88 cents and 91 cents.

The end of the year is generally the most profitable for e-commerce companies thanks to a busy holiday shopping season, but Swan said eBay has to account for the company's investments in improving its standings in Google's search results -- which it said accounts for a small part of its traffic but is important for bringing on new consumers -- and in marketing around the networkwide password change related to the security breach.

eBay's stock closed at $50.24 Wednesday. The stock was down by less than 1 percent during after-hours trading shortly after the earnings news.

Update, 3:35 pm PT: Adds information from the earnings call.