eBay's first-quarter earnings exceed forecasts

SAN JOSE, Calif. - Shares of eBay Inc. sank after the Internet trading leader reported first-quarter earnings that beat Wall Street forecasts but showed weakness in some auxiliary businesses. <br> <br> EBay said Thursday afternoon that in the three-month period ending March 31, it earned $47.6 million, or 17 cents per share, on revenue of $245.1 million. In the comparable period last year, eBay made $21.1 million, or 8 cents per share, on revenue of $154.1 million. <br> <br> Excluding special charges in the first quarter, San Jose-based eBay earned $50.6 million, or 18 cents per share. Analysts surveyed by Thomson Financial/First Call had predicted earnings of 16 cents per share on revenue of $245.3 million. <br> <br> &#34;We feel really good,&#34; said Rajiv Dutta, eBay&#39;s chief financial officer. &#34;There&#39;s only a handful of companies that can grow (pro forma income) at 65 percent and increase profits against a backdrop of a tough economic environment and a down market for Internet advertising.&#34; <br> <br> Investors were less enthusiastic, driving eBay shares down $1.94, nearly 4 percent, to $51.10 in after-hours trading Thursday on the Nasdaq Stock Market. <br> <br> EBay&#39;s base of registered users expanded to 46.1 million in the first quarter, 55 percent higher than last year. The value of all goods sold on the site hit $3.1 billion, up 57 percent from last year. <br> <br> With such measurements continuing to rise sharply, eBay now expects to earn 17 cents per share in the current quarter and 73 to 75 cents per share for the entire year. Both estimates are higher than previous guidance but in line with Wall Street&#39;s existing projections. <br> <br> Revenue forecasts are now $260 million to $265 million for this quarter and $1.05 billion to $1.10 billion for the year, also similar to what analysts already were expecting. <br> <br> Although year-over-year sales growth fell somewhat -- to 59 percent from 64 percent in the previous quarter -- chief executive Meg Whitman said she was increasingly comfortable with her long-term goal of getting eBay&#39;s annual revenue to $3 billion by 2005. <br> <br> EBay&#39;s success has come from its domination of the domestic Internet auction market and the steadily improving performance of its sites tailored for users in 26 other countries. Even though eBay pulled up stakes in Japan, the company&#39;s international revenue amounted to $53 million in the first quarter, nearly three times last year&#39;s total. <br> <br> One of the few downsides in the report was a 32 percent decline in advertising revenue from the previous quarter. Whitman attributed the drop to overall economic weakness but played down the significance of advertising in eBay&#39;s transaction-based model. <br> <br> &#34;We have always said advertising revenues are the icing on the cake,&#34; she said. &#34;They were never the cake.&#34; <br> <br> Analysts also expressed concern about a 17 percent year-over-year drop in sales of services that enhance trading on eBay. For example, sellers can get software that makes it easier to post pictures of their items, while buyers can pay to have a third party inspect a car on eBay Motors. <br> <br> Such services will be essential for eBay to keep pulling traditional, real-world business onto its online platform, said analyst John Corcoran of CIBC World Markets. <br> <br> &#34;I think they put up a decent quarter. Their core business is very strong,&#34; Corcoran said. &#34;The non-core businesses had wobbly knees.&#34; <br> <br> Dutta and Whitman refused to comment on rumors that eBay is interested in acquiring PayPal Inc., the online payment service that heavily caters to eBay buyers and sellers, in competition with eBay&#39;s own Billpoint service. PayPal&#39;s CEO said this week his company was focusing on operating as a standalone company. <br> <br> ------ <br> <br> On the Net: <br> <br> http://www.ebay.com <br> <br>