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eBay Posts Better Than Expected Q3 Profit on Strong PayPal Growth

eBay Posts Better-Than-Expected Q3 Profit on Strong PayPal Growth

By Associated Press | Updated: 16 October 2014 09:10 IST

eBay Inc. on Wednesday reported better-than-expected earnings for the third quarter as its PayPal payment unit continued to have strong growth.

But revenue missed expectations and the company cut its sales forecast for the year, hurt by the stronger dollar and lower-than expected traffic in its marketplace division.

The company's PayPal business had another strong quarter. Revenue grew 20 percent to $1.95 billion and mobile payment volume jumped 72 percent to $12 billion. PayPal remains on track to process 1 billion mobile transactions this year. Earlier this month eBay said it would split off the payment processor, its fastest growing unit, late next year.

The marketplaces business grew revenue 6 percent to $2.16 billion, and gained 3.4 million new buyers to end the quarter with 152 million active buyers, up 13 percent. That fell short of expectations, CEO John Donahoe said in a call with investors. The marketplace division is facing the lingering effects of a security breach first reported in May that led to a global password reset. It is also still recovering from Google Inc. changing the rules for its search engine earlier this year, which made it harder for eBay results to come up during Web searches.

"Slowing traffic growth delayed the modest recovery expected in the second half," Donahoe said.

He added that the company is dealing with the problems by investing in marketing to raise awareness for the eBay brand and drive traffic to the site. It's also working on ways to make its products show up more often during Google searches.

"eBay will be focusing more aggressively on where it can compete and win and deliver sustainable growth," Donahoe said. He added that separating eBay and PayPal "strongly supports this direction because separation will allow eBay to more clearly align its strategy, cost structure and capital allocation in a way that's good for customers and good for shareholders."

The results come as the retailer gears up for the all-important holiday shopping season in November and December. In an interview with The Associated Press, Donahoe said that the company is focused on customers using digital media to shop during the holidays, from their smart phones to laptops, with a new global marketing campaign and a new iPad app due out soon.

The San Jose, California-based company reported a profit of 54 cents per share. Earnings, adjusted for one-time gains and costs, were 68 cents per share. The results surpassed Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of 67 cents per share.

eBay posted total revenue of $4.35 billion in the period, falling short of Street forecasts. Analysts expected $4.37 billion, according to Zacks.

For the current quarter ending in December, eBay expects its per-share earnings to range from 88 cents to 91 cents on revenue of $4.85 billion to $4.95 billion. Analysts surveyed by Zacks had expected higher revenue of $5.17 billion. The company cut its forecast for full-year revenue to a range of $17.85 billion to $17.95 billion, from a prior range in July of $18 billion to $18.3 billion.

eBay shares have declined slightly more than 8 percent since the beginning of the year, while the Standard & Poor's 500 index has climbed nearly 1 percent. Shares fell 35 cents to close at $50.24, a fall of almost 7 percent in the last 12 months.

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