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EBay Posts a 29 Percent Drop in Profits in Q2

With PayPal and Skype outperforming the rest of the business

Jul 23, 2009 08:11 GMT  ·  By
eBay trumps analyst expectation but still sees a 4 percent drop in revenue
   eBay trumps analyst expectation but still sees a 4 percent drop in revenue

Ebay's financial results for the second quarter came in and they're pretty much in keeping with the rest of the industry and the general trend, with revenue and income slightly down but ahead of analysts’ expectations. Revenue dipped 4.5 percent, from $2.2 billion in Q2 2008 to $2.1 billion in this year's second quarter, with income following a similar path but dropping 29 percent since last year, from $460 million to $327 million. The company estimates similar results in Q3, expecting a revenue between $2.05 billion and $2.15 billion.

“We drove solid second quarter results, with strong momentum and market share gains at PayPal and continued stabilization in our core eBay business,” John Donahoe, eBay president and CEO, said. “We are managing our business with focus and discipline, delivering on our commitments while investing in our growth priorities. I’m pleased with our pace, our progress and our performance.”

PayPal and Skype saw a solid quarter but their growth was offset by the underperforming Marketplaces business. Donahoe though is going ahead with his plans laid out last spring, further emphasizing PayPal, spinning off Skype as an independent company, publicly traded, and moving the main site from an auction-based system towards online retailing.

The Payments business consisting of PayPall and Bill Me Later did very well this last quarter, posting an 11 percent growth in revenue raking in $669.3 million. It's also doing well gaining users with active registered accounts reaching 75.4 million in June a 20 percent increase year over year.

Despite plans to spin off Skype going ahead with an IPO sometime next year, the communications business also did very well, with a 25 percent rise in revenue, bringing in $170 million, and continues to be one of the most popular services online with 480.5 million registered users, a 37.3 million increase since last quarter.

Meanwhile, Marketplaces, which is made up of eBay, Shopping.com, StubHub and other ecommerce sites, saw a 14 percent drop in revenue year over year, managing to earn $1.26 billion. eBay blames the decline on the overall economic conditions and plans to offer more localized services and to move its core business more towards online retailing.