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	Discussion Board eBay

By Rick Aristotle Munarriz (TMF Edible)

Reading Paul's glowing testimonial of eBay brought back some nostalgia. I feel like an older brother seeing the holiday glow in his little brother's eyes, knowing full well that the days of believing in the wonder of Santa Claus are numbered. Oh, how that sentimental soundtrack swells.

But, it doesn't end there. Paul seems to also be a believer in the Cash-Flow Bunny and the Fat-Margin Fairy. Nostalgia, please screech the record!

Thank you.

Why is Paul parading about eBay's financials? The company couldn't muster two dimes a share in free cash flow for all of last year. The "eBay is a profitable Internet company" argument only means the company will survive. As I pointed out in Beyond Dot-Com Survival last week, being in the black does not mean a company will thrive. There's a major difference. Pennies in profits and slowing growth does not earn eBay its $14 billion moniker. That kind of thinking is so 1999.

Oh, eBay is sticky. Great. So is the floor at your local multiplex. That doesn't mean you'd want to be crawling around in it. Buyers are there. Sellers are there. Yes, but the metropolis buzz also brings in the seedy element, especially when eBay knows that its "scalability" gains in the near term are accomplished by keeping the streets dimly lit.

What then? Paul is happy with eBay's gross margins, but why? That's the nature of slamming the gavel and shouting "Sold!" Sotheby's (NYSE: BID) has been reporting 80% gross margins for years, but that didn't stop it from cutting jobs in a move to restructure a few weeks ago.

Moreover, Paul's dreaming with his visions of 90% gross margins. With eBay and half.com, the company has pretty much tapped the online garage-sale market. Expansion will probably mean dabbling in lower-margin segments -- not higher.

I'm sorry, Paul. Let's grab some milk and Christmas cookies and have a talk by the tree. I think there's something you should know.

Rick Aristotle Munarriz has completed 43 successful auctions on the eBay site. However, true to his Duelspeak, he's not an owner of the stock. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.

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