|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | |
APRIL 21, 2005
By Robert D. Hof eBay's Bid to Regain Its Glow It matched analysts' first-quarter expectations, but that wasn't quite enough to see investors shake off the Street's dour mood
But that apparently wasn't enough to energize investors, who played ping-pong in after-hours trading, moving eBay's share price up and down a point or so. That followed a 3% rise, to $33.11 a share, before the report, thanks to the afterglow of Yahoo's (YHOO ) better-than-expected quarterly earnings. "The results are not likely to alter perceptions," says Pacific Growth Equities analyst Derek Brown, who has an "underweight" rating on eBay, which is a BusinessWeek 50 company. NATURAL SLOWING? Brown says he has the same concerns he has been feeling for several quarters: eBay's growth is clearly slowing, especially in the U.S. The transaction revenue in its core market rose only 19%, possibly the slowest rate of growth ever for eBay, and below the 24% clip of the fourth quarter. Growth in listings and gross sales also continued to decline, as Chief Executive Margaret Whitman pointed out. "We saw softer listings growth in January than expected," she said during a conference call, though eBay promotions helped pick up the pace by mid-February. In an interview with BusinessWeek Online, eBay Chief Financial Officer Rajiv Dutta said growth of U.S. gross sales, now at $20 billion annually, will slow naturally over time, but he added that eBay still hopes to recharge them. "We believe eBay should be able to grow faster than e-commerce overall," he said. "That's our goal." Some analysts, in fact, aren't all that concerned. According to Scott Devitt, an analyst with Legg Mason Wood Walker, eBay clearly managed to avoid underperforming against expectations, which many other analysts had feared. "This business continues to dominate its segment, and it's growing earnings at 30% a year," he says. Devitt has a buy on the stock. INVESTING IN CHINA. In any case, the reaction to eBay's more recent results were a far cry from the alarm that followed the company's fourth-quarter report in January (see BW Online, 1/20/05, "eBay Loses Some Mojo"). A slight miss on earnings tanked the company's stock, knocking it down 19% the next day. Despite the January swoon and the fact that eBay shares are down 40% on the year, analysts haven't had high expectations for big gains on eBay share prices since then. Ten analysts had hold or sell ratings on the stock. International sales continued to drive the modest upside eBay managed to muster. Non-U.S. sales jumped 52%, to $394 million, from a year ago, thanks to strong growth in Britain and China, among others. In China, eBay is planning to spend upward of $100 million this year to capture the high ground against local competitors such as Alibaba and TaoBao. But not all countries are running on all cylinders. In Germany, for instance, Whitman conceded, "We are currently seeing slower growth than we'd like." She said she expects growth to resume in coming quarters, owing to increased marketing and new features. HUNGRY RIVALS. eBay's payment processing unit, PayPal, also continued on its rocket ride. Revenues jumped 47%, to $233 million, thanks in part to its move into fast-growing new international markets. Along with the efforts in China, it ranks as one of eBay's biggest initiatives this year. PayPal is trying to woo merchants outside of eBay to use its system, with some success. Apple Computer's (AAPL ) iTunes store, for instance, now allows customers to pay for downloads with PayPal. One big concern remains: the price of marketing. In the fourth quarter, eBay cited the rising cost of search advertising as the reason for a big increase in marketing expenses. Those expenses weren't quite as onerous in the first quarter, falling to 26% of revenues, from 29% in the previous quarter. Lower spending on television ads, which peaked in the fourth quarter, accounted for the drop. But that means search advertising prices remain relatively high, though still only 5% of U.S. revenues. This year, eBay will need to address nagging concerns that the company's slower growth means it's losing ground to new rivals such as Overstock.com (OSTK ), which started its own auctions last year. A WORK IN PROGRESS. In the first quarter, eBay ran more promotions on its site and introduced new features, such as Best Offer, through which buyers can make an offer instead of participating in the auction process or accepting the listed fixed price. Fixed-price listings with Best Offer garnered 23% higher prices than listings without, Whitman said. The good news, says Devitt, is that eBay has plenty of money to keep developing new features. It produced $495 million in cash flow in the quarter, he notes. "It's pretty well-positioned to invest in the future," says Devitt. If eBay intends to regain more of its luster, the company will have to do just that.  Hof is Silicon Valley bureau chief for BusinessWeek
BW MALL
SPONSORED LINKS
Buy a link now!Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2005, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version
