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eBay earnings drop but beat estimates

Weakness in online auctions hits company with 29 percent drop in second-quarter earnings. But results still beat expectations.

Lance Whitney Contributing Writer
Lance Whitney is a freelance technology writer and trainer and a former IT professional. He's written for Time, CNET, PCMag, and several other publications. He's the author of two tech books--one on Windows and another on LinkedIn.
Lance Whitney
2 min read

Hurt by its sluggish auction business, eBay reported a 29 percent drop in second-quarter earnings.

Net income fell to $327 million, or 25 cents a share, compared with $460 million, or 35 cents a share, in the year-ago quarter. Sales also were lower, slipping 4.5 percent to $2.1 billion for the quarter ended June 30, the company said Wednesday.

Excluding one-time charges and stock-option costs, eBay said quarterly earnings would have reached 37 cents a share, or $478.6 million.

Despite the downturn, results beat the forecasts of analysts, who had expected sales of $1.99 billion and net income of 36 cents a share.

eBay said that the volume of merchandise sold on its auction site fell 10 percent in the quarter compared with a year ago, though analysts had been expecting a decline of 20 percent or more.

eBay's second-quarter results. The figures are in millions.
eBay's 2009 second quarter results eBay

The results prompted some analysts to raise their investment opinions and earnings estimates on eBay.

Growth in eBay's core auction business has stalled over the past year, prompting the company to try new tactics. It's been pushing more fixed-price auctions, hoping to lure back buyers and sellers.

But the weak auction trade has been offset by healthy growth for both PayPal and Skype.

PayPal revenue hit $669 million in the second quarter, a gain of 11 percent from the previous year. Skype saw revenue rise 43 percent to $170 million.

PayPal President Scott Thompson recently said he plans for the company to double in size next year. And Skype, which eBay scooped up four years ago, is expected to launch an IPO next year.

For the current quarter, eBay is looking for sales of $2.05 billion to $2.15 billion, while analysts have been eyeing revenue of only $1.99 billion. Excluding special charges, the company is projecting earnings of 34 cents to 36 cents a share, with analysts on average forecasting 35 cents a share.

"We are making progress," eBay CEO John Donahoe said on a conference call with investors. "But we know we still have the long way to go as we work to improve trust, value and selection, and we will stay focused on this execution path."