January 19, 2012 12:15 am

PayPal’s strength drives growth at Ebay

Ebay reported strong revenue growth in the fourth quarter of 2011, driven mainly by its payment arm, PayPal, which the company expects to be at the centre of its innovation in the coming year, despite the recent departure of its president, Scott Thompson, for Yahoo.

“We will not skip a beat as we manage the transition at PayPal,” said John Donahoe, chief executive of Ebay and interim president at PayPal. “I’ve spent a lot of time with the PayPal leadership team over the last two weeks. They have enormous ownership over the PayPal vision and enormous commitment to the PayPal plan.”

Ebay reported a 35 per cent increase in revenues for the fourth quarter to $3.4bn, compared with $2.5bn in the same quarter last year. PayPal revenue increased 28 per cent to $1.2bn, compared with $971m the year before.

Ebay reported net income of $789m, or 60 cents per share, for the fourth quarter, ahead of analysts’ estimates of 57 cents per share on revenues of $3.32bn, and a 15 per cent increase over the same quarter last year.

By GAAP measures, Ebay’s net income grew to $1.98bn, or $1.51 per share, up from $559m, or 42 cents per share, mainly due to its sale of Skype being completed.

The company forecast first quarter earnings of 50 to 51 cents per share on $3.05bn to $3.15bn in revenue, below analysts’ expectations of 54 cents per share on $3.16bn in revenue.

Much of PayPal’s growth is coming from non-US and emerging markets. In the fourth quarter, revenues from international markets surpassed revenues from the US for the first time.

But managing cross-border trade has presented some challenges for Ebay recently, particularly with the weakened euro. It has been difficult for sellers in weaker currency markets to make deals with consumers in stronger currency markets.

Bob Swan, Ebay’s chief financial officer, said that while the company remained “anxious” about cross-border volumes related to the weakened euro, “we are bullish about web-enabled commerce overall, and ecommerce in particular”.

Cross-border trade accounts for 20 per cent of Ebay’s marketplaces business and 25 per cent of PayPal’s business, Mr Swan said.

PayPal continued to drive growth by increasing adoption of its services, adding 1m new accounts per month in 2011, and closing the quarter with 106m registered accounts.

Mr Donahoe said the company would continue to push for growth in mobile payments as consumers increasingly used smartphones and tablets to shop online.

He promised more partnerships with retailers, and revealed one “walletless” payment experiment with Home Depot, the US home improvement chain. Starting in stores in the San Francisco Bay area, customers will be able to pay for purchases by swiping a PayPal card or entering their mobile phone number with a pin.

Ebay shares were up nearly 2 per cent in after-hours trading.

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