Surge in sales helps dot.com survivor eBay to triple earnings

David Usborne
Saturday 18 January 2003 01:00
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EBAY, the Web-based auction site, continued to demonstrate that, with the right formula, it is possible to survive the internet carnage. The company revealed that, with strong Christmas sales, it had tripled its fourth-quarter earnings and issued even more bullish forecasts for the first quarter of this year.

"EBay is poised to become one of those great companies that only come along once in a generation," boasted the company's chief executive, Meg Whitman, after the release of its latest numbers late on Thursday. "It truly was a very merry e-Christmas." The figures impressed investors who added 3 per cent to California-based eBay in early trading yesterday.

Analysts praised the company's headway, driven in large part by international business. "The eBay engine is firing on all cylinders right now," said Shawn Milne with SoundView Technology.

A surge in pre-Christmas sales was spurred in part by eBay's first major television advertising campaign launched at a cost of $14m (£8.7m). It also widened the kinds of goods available to online bidders, including jewellery, electronics and even used cars.

With most of the revenue coming from commissions charged on sales, the company said fourth-quarter earnings reached $87m, compared with $25.9m posted in the same quarter a year earlier. That came out at 28 cents a share, higher than the 24 cents a share that analysts were forecasting.

Meanwhile, the company expects to attain 30 cents a share in the first quarter of this year as well as for the rest of 2003. It predicts that revenue for the full year should reach $1.9bn. Further ahead, executives aim to create an online bazaar that will command $35bn to $40bn in sales within three years.

Noting that revenue growth was strongest on international sales, the company identified Germany as its strongest customer base outside the United States. International auction activity reached $107m in the fourth quarter, a startling increase of 173 per cent. Domestic US sales rose by a more modest 58 per cent.

Part of eBay's strategy in the holiday period was to identify goods that were likely to be in short supply in shops. Among them was Hasbro's Fur-Real Friends robot cat, which generated 6,000 auctions in early December. EBay has also started to offer some fix-priced goods, threatening Amazon. com's territory. Shares in Amazon, which reports next week, were down 2 per cent in early trading yesterday.

Its future growth targets still represent a challenge, though. "There are still a lot of people who don't consider eBay as a buying option," Christa Sober of Thomas Weisel Partners commented.

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