EBay Beats Wall Street Expectations

EBay exceeded Wall Street's earnings and revenue expectations for its fourth quarter and, as expected, announced that Meg Whitman will step down as president and CEO at the end of March, ending her 10-year tenure at the helm of the e-commerce giant.

For the quarter ended Dec. 31, 2007, eBay had revenue of US$2.18 billion, up $461 million from the fourth quarter of 2006 and above the $2.14 billion consensus estimate from analysts polled by Thomson Financial.

Revenue grew across the board, but PayPal, StubHub, Skype and advertising performed particularly well, as eBay enjoyed strong sales during the 2007 holiday season, the company said Wednesday.

Net income was $531 million, or $0.39 per share, up from $346 million, or $0.25 per share, in 2006's fourth quarter. On a pro-forma basis, which includes one-time items, net income was $611 million, or $0.45 per share, topping the consensus expectation by $0.04.

Whitman will hand over her CEO and president titles on March 31, but she will remain on the company's board of directors. She will be succeeded by John Donahoe.

In a conference call to discuss the financial results, Donahoe said the eBay marketplace business isn't growing as fast as he would like, and that a priority is to make it "easier and safer to use."

"Buyers have become accustomed to streamlined purchasing experiences that put a premium on speed, convenience and reliability," he said. "While we've made strides in these areas, I'm clear we need to do much more."

He's ready to be aggressive about making changes to eBay's buying and selling experience to meet users' expectations, he said.

EBay, which started as an auction site, later added fixed-price items to its marketplace, but it is still viewed by many mainstream online buyers as complicated to navigate and not safe enough, when compared with more traditional e-commerce sites like Amazon.com.

At the same time, Amazon.com has been invading eBay's territory by letting small merchants set up shop on its site via the Amazon Marketplace service, and providing more safeguards and guarantees to buyers than eBay does.

According to Donahoe, eBay will continue its attempts to attract new mainstream buyers to its marketplace this year. "Watch for us to make some exciting announcements about feedback, new user-protection programs, customer support and pricing," he said.

Along these lines, he will also focus on balancing the excitement and value of auctions with the convenience of fixed-price items, which may require significant changes to the eBay marketplace, customer approach and business model, he said.

Meanwhile, Whitman said her plan all along had been to lead the company for about 10 years and then give up the reins. "I'm extremely proud of eBay's performance in 2007, but more than that I'm very confident about our future," she said.

Whitman joined eBay in March 1998, when the company operated only in the U.S. and had 30 employees and $4.7 million in annual revenue. It now operates worldwide with more than 15,000 employees and almost $7.7 billion in revenue.

Donahoe has been with eBay since February 2005, coming from Bain & Company, where he was worldwide managing director since 1999. He is president of eBay Marketplaces, which generates more than 70 percent of the company's global revenue.

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