Last updated: April 20, 2006 4:18 pm

Ebay data fail to dispel growth concerns

Ebay’s latest quarterly results on Wednesday failed to dispel concerns that growth in its core online auctions business is decelerating, leading to an 8 per cent fall in the internet company’s shares in morning trading in New York on Thursday.

However, with growth from its online payments and Skype internet voice services exceeding most expectations, the e-commerce company was able to hit expectations for revenues and earnings in the period.

Reported earnings fell by 3 per cent to $248m from a year earlier as eBay deducted the cost of stock options from its profits for the first time, reflecting an accounting change that has also hit many other technology companies.

Excluding the options charge and foreign currency fluctuations, eBay said its operating income would have risen by 25 per cent, to $460.7m.

Net revenues, meanwhile, increased by 35 per cent to $1.39bn as the number of listings on its e-commerce sites grew by 33 per cent.

Ebay’s profit margins have fallen over the past year as it has seen faster growth from lower-margin businesses such as payments and communications, and as it has continued to invest heavily in new services to extend its reach beyond its traditional auctions business.

During the latest quarter, growth in the company’s auction business was hampered in part by a switch to a new way of displaying listings from its stores service, which lets sellers list higher volumes of products at lower cost. A decision halfway through the quarter to display stores listings when buyers search for products on eBay had not gone down well in the US, said Bob Swan, chief financial officer. Many buyers had felt overwhelmed by the number of items and left eBay rather than bid, he added.

As a result, eBay’s gross merchandise volume – the total value of goods traded through its sites – had risen by only 18 per cent in the period, or 22 per cent adjusted for foreign currency movements, compared with the much bigger percentage jump in listings volumes. Ebay said it had switched back to its former approach to displaying listings in the US and Canada last week, though the change had gone down better in other markets.

Ebay said that revenues from its US marketplaces increased 30 per cent from a year before, to $527m, compared with the 39 per cent growth seen in the preceding quarter; international marketplaces grew 25 per cent to $493m, a slowdown from 35 per cent.

Meanwhile, revenues from the PayPal payments business grew 44 per cent to $328m, while income from the recently acquired Skype came to $35m.

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