Brian.oco 0 Posting Whiz

Oh, my - eBay shares dropped 7% in Wednesday trading. That after the company announced in a wide-ranging conference call with analysts that it wouldn’t meet current quarterly sales and revenue projections.

That throws cold water on eBay’s reputation as a company that constantly delivers a positive earnings outlook every quarter, but that’s the lay of the land these days, and eBay is no different.

There is some good news in the earnings mix for eBay. The company posted a 22% gain in Q2 net profits and it said that earnings for the remainder of the year wouldn’t rise, but wouldn’t fall, either. It’s a pretty cautious stance from eBay and analysts were quick to notice.

"What eBay is saying now is, 'We don't want to go out on a limb,"' Martin Pyykkonen, a tech analyst at Global Crown, told Reuters. said. "The economy is working against them."

It seems that customer volume is still strong, but the problem is those customers aren’t spending as much money. The average per-transaction sales price on eBay fell during Q2, a clear reflection that consumers are very worried about the economy – but not so much that they won’t spend a little money on their favorite auction items. To get more sellers in the fold, eBay is trying to lure more sellers to the site, and has cut upfront listing fees for sellers to make that happen.

Altogether, eBay’s Q2 net income net income rose to $460 million, or 35 cents per share, from $376 million, or 27 cents a share, a year earlier. The company bought back 19 million shares worth $566 million in the quarter, helping to lift earnings per share.

Revenue rose 20 percent to $2.2 billion, helped by a 27 percent rise in international sales, while U.S. sales grew by only 12 percent. Analysts expected $2.17 billion, on average.

For the third quarter, expects revenue of $2.10 billion to $2.15 billion, and adjusted earnings per share of 39 cents to 41 cents. Those were below average analyst projections of 41 cents per share on revenue of $2.17 billion.

For the full year, eBay said adjusted earnings per share would be in line with the $1.74 expected by Wall Street.

The company expects 2008 revenue of $8.8 billion to $9.05 billion, up slightly from a range given in April of $8.7 billion to $9.0 billion. But that is on the low side of Wall Street estimates ranging from $8.9 billion to $9.24 billion.

Checking in on eBay’s Conference Call Today

Tech Ticker has a nice blow-by-blow rundown of today’s conference call hosted by CEO John Donahoe. Here’s the skinny:

5:00: Call starts

5:05: CEO John Donahoe: delivered strong financial results. In our marketplaces business we feel good about overall results. Marketplaces revenue grew 13%. We're seeing encouraging signs from the changes we're making.

5:06: Our marketing services businesses also performed well led by strong momentum in classified and advertising.

5:06: PayPal revenue was up 33%. Increasing ubiquity of PayPal online. We're only beginning to tap the potential.

5:07: Skype had its 6th consecutive quarter of positive growth.

5:08: Priorities for 2008: make Ebay easier and safer, weave auctions and buy it now together, continue PayPal's dominance in online payments both on and off eBay.

5:10: New listings grew 19% in Q2. Selection on eBay is unmatched and it's getting stronger. We're seeing early results in our efforts to improve trust and safety. Sellers, both large and small, are making customer satisfaction a competitive advantage on eBay.

5:10: The number of power sellers with Detailed Sales Ratings of 4.8 or above (out of 5) has doubled.

5:12: Everytime you make a change someone's going to be mad. There are two areas where we've recently modified our plans -- last week we made changes in feedback, and we backed off our plan to make PayPal the only payment system in Australia.

5:14: PayPal has great growth prospects. PayPal and eBay greatly benefit from each other. Global penetration increased 5% y/y to almost 57% worldwide.

5:15: Seeing dramatic growth in the merchant services side. JetBlue, Blockbuster, and others have started offering PayPal this quarter.

5:16: Skype: revenues grew 51%, on track to pass $500 million in revenues with double-digit profit margin. Free peer-to-peer video is now used in 25% of Skype calls.

5:17: Rajiv Dutta is retiring from head of global marketplaces. He was previously CFO. Lori Norrington is replacing him, she was former CEO of Shopping.com.

5:20: CFO Bob Swan: Size of our business has increased more than 50% in the past two years. We've begun to capitalize on new opportunities like classified and advertising. PayPal transactions are now 26% of revenue. Marketing Services is 11% and Skype is 6%.

5:22: Repurchased 566 million eBay shares in Q2.

5:23: Operating Margin came in lower because of focus on lower margin businesses -- PayPal and Skype.

5:24: CapEx 6% of revenue for the past four quarters.

5:24: Return on investment capital was 28%

5:25: Growth in marketing services was fueled by advertising deals and classified businesses. Marketplaces growth was negatively impacted by 3% because of Power Seller discounts, among other things.

5:26: International GMV grew by 4% over last year, excluding foreign exchange.

5:26: One of our key initiatives is to increase selection on the sites. We reduced upfront fees. the pricing changes have had their desired effect on selection. With selection increasing fairly dramatically, we experienced an expected decline in conversion rates. Sold items growth was 10% of the quarter, a 1% decrease from last quarter. This is largely because Korea and Australia. Average selling price declined by 6% from last year, because of the slowing economy, a campaign in Germany that brought lower priced items onto the site, and a crackdown on fraud.

5:29: PayPal posted a strong quarter. total payment volume was $15 billion, a y/y increase of 35%. We believe the strong growth in PayPal, is a result of our efforts to increase ubiquity of PayPal, increased use both on and off eBay.

5:31: We remain focused on tremendous growth opportunities for PayPal.

5:32: Skype total revenue increase 51% over last year. 338 million total users.

5:33: Product development came in 40 basis points higher than last year. G and A came in 20 points lower than last year. $2.9 billion of the $3.4 billion of eBay's cash rests outside the U.S.

End of Call

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