eBay Inc., the world’s biggest Internet auctioneer, has projected its first quarterly sales decline.
Today eBay’s stock price fell USD0.52, to $14.81. Fourth-quarter revenue will be $2.02 billion to $2.17 billion, the company forecast yesterday, compared with $2.18 billion a year earlier. The value of goods sold on eBay’s sites fell by 1% in the 3rd quarter, the first drop in eBay stock market history. eBay has been making acquisitions to improve its market share further, including buying PayPal, and reviewing its fees structure. eBay plans to increase marketing spending to fight for our sellers in what they expect to be a tough holiday season. Thanksgiving and Christmas are the busiest period in the retail sector, but the credit crunch is biting hard and could well reach its peak at the end of this year.
EBay reported net income of $492 million, or 38 cents a share, for the third quarter, compared with a loss of $935.6 million, or 69 cents, a year ago, when results were hit by a writedown in the value of its Skype
Internet telephone unit. The company projected fourth-quarter profit, excluding items, of 39 cents to 41 cents a share, compared with an average analyst estimate of 47 cents. Twenty-one analysts estimate sales of $2.42 billion in the quarter. Gross merchandise volume, or GMV, the value of all goods that users sold on EBay’s sites, fell 1 percent.
“It’s a combination of the company’s natural business model slowing down, partly because of increased competition,” Douglas Anmuth, an analyst at Barclays Capital in New York, said in a telephone interview yesterday. “Then you have the macro environment. The numbers are certainly worse than I expected.”
EBay’s marketplaces revenue rose 4 percent to $1.38 billion in the third quarter. New marketplace listings climbed 26 percent from a year earlier, the fourth consecutive quarterly increase, EBay said. The average selling price on EBay’s Web sites fell 7 percent, as consumers globally were squeezed by higher fuel and food prices, job losses and the worst financial crisis since the Great Depression. They are buying “fewer large ticket items” Donahoe said yesterday. Revenue from Skype, which added 32 million users in the quarter, climbed 46 percent to $143 million.
Donahoe inherited about 15,500 employees when he took over from predecessor Meg Whitman in April, almost double the 8,100 at the start of 2005, after acquisitions including automobile trading sites in Europe, Skype, online ticket-reseller StubHub and Web recommendation site StumbleUpon. One thousand full-time employees and about 600 temporary and part-time workers will be fired by the end of this year, EBay said.
The job cuts will cost eBay $70 million to $80 million pretax, most of which will be recorded in the fourth quarter, and lead to annual savings of about $150 million.
Source: Bloomberg.
The credit crunch really is starting to hit all areas of the internet. With falling advertising revenue, reduction in prices and falling retail sales, all leading to falling demand for hardware, servers, and fewer net start ups, the internet is really heading for a shake up in the forthcoming months / years. Like the banking sector, there could well be some fire sales and rapid mergers and acquisitions to help protect business interests and save jobs.
