PayPal and Skype continue to save the day at eBay (Nasdaq: EBAY). The online giant posted better-than-expected results last night, despite continued weakness in the company's flagship Web auctions business.
Revenue fell 8% to $2.02 billion, with non-GAAP earnings slipping 7% on a per share basis to $0.39. Analysts were banking on a non-GAAP profit of $0.34 a share with $1.94 billion on the top line.
Here's how the tug-of-war on the revenue front breaks down:
- PayPal +11%
- Marketplaces -18%
- Skype +21%
Last night also offered either a blip or a changing of the guard at the company. I've been following eBay since the 1990s, and this is the first time that I recall the performance breakdown beginning with the company's Payments unit instead of eBay.com's Marketplaces division.
The scary thing about the 18% plunge in marketplace revenue? It includes a 23% spike in the company's online classifieds business. If not for sites such as Craigslist-esque Kijiji, eBay's ailing auctions would have plunged the company into an even greater funk.
At this point, burned PowerSellers -- who have vocally moved on to other auction sites -- might let out a harsh, cackling laugh. However, eBay's still managed to hold its portfolio together in the end. It's now managed to surpass Wall Street's bottom-line estimates for 11 consecutive quarters. This doesn't excuse the shrinking of eBay.com itself, but it's hard to dismiss a company that just raked in $577.6 million in free cash flow during a sinking quarter.
Will eBay have a growth void to fill when it spins off Skype next year? Probably, though Skype represents less than 8% of the revenue mix here. The purchase of South Korea's Gmarket (Nasdaq: GMKT) should help fill some of Skype's void -- and beef up marketplace revenue to boot.
The company is certainly armed with enough cash to keep the shopping spree going. It has $3.1 billion in the bank, and it's generating enough free cash flow to buy a Gmarket every two quarters. It can buy Bidz.com (Nasdaq: BIDZ) and Overstock.com (Nasdaq: OSTK) -- two small companies that have clever spins on marketplace concepts -- in a single quarter, and still end up with a beefier balance sheet by quarter's end.
In short, watch your back, MercadoLibre (Nasdaq: MELI)! eBay has perfected the art of overdelivering -- and it's apparently not afraid of overeating, either.
More items in the eBay bid basket:
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