The world's number-one auction site appears to have strengthened its position during the fourth quarter. Revenue and earnings came in ahead of expectations, margins kept growing, and registered users topped the 20 million mark. Meanwhile, rival Yahoo!'s move to initiate listing fees appears to have given eBay room to boost its own tariffs.

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By Rex Moore (TMF Orangeblood)
January 18, 2001

If ever it was to be expected, this was the time. eBay (Nasdaq: EBAY) beat earnings estimates today, just as nearly every analyst predicted in the last couple of days. There was no whisper number -- it was more like a shout. "eBay will beat estimates, and revenue will come in higher than expected."

The online auction leader did not disappoint, reporting fourth-quarter consolidated net income of $23.9 million, or $0.09 a share. That topped estimates by $0.02. Consolidated net revenues came in at $134 million. Most revenue estimates were in the $126 to $130 million range. For all of 2000, eBay generated $431.4 million, a 92% increase over 1999. Net income of $48.3 million -- $0.17 a share -- was up 143% year-over-year.

Other highlights:

• Gross margin just keeps getting better -- look at the steady increase, quarter-by-quarter, from a year ago: 71%, 73%, 76%, 79%, and now 82%.
• Registered users have now topped the 20 million mark. eBay added 3.5 million during the quarter, so the total now stands at 22.5 million, a 125% increase from last year.
• Gross merchandise sales, which is the total value of goods traded on the site, was a record $1.6 billion. That compares to last quarter's $1.4 billion.
• eBay hosted 79.4 million auctions during the quarter, compared to 68.5 million in the third quarter. The year-ago count was 41 million.

Even with the higher expectations, it looks like investors (including this writer) are pleased. After trading up 8% today, the price is up an additional 10% after hours, as of this writing.

The company has had a busy couple of weeks. Last Monday it announced an agreement to acquire a majority stake in Korea's largest auction site, Internet Auction Co. This Monday it launched eBay Italy, and now has a presence in the nine countries that generate the majority of the world's e-commerce revenues.

Finally, just two days ago, eBay raised the fees it charges sellers to list items for auction. Effective Jan. 31, listing prices will go up between 10% and 20% for most items. Some analysts say it could add 5% to bottom line by year's end. (The fee hike comes after Yahoo! (Nasdaq: YHOO) decided earlier this month to begin charging for its previously free U.S. auctions.)

eBay's move to raise its prices so soon after Yahoo's decision almost has the feel of a lion going for the kill. Management knows Yahoo!'s total auction count will plummet; after all, the same thing happened to eBay when it began charging in Germany and England. eBay's count rebounded relatively quickly in those countries, but Yahoo! can't necessarily count on the same thing happening with its count -- not with 800-lb gorilla eBay standing in the way.

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