Congratulations, eBay (NASDAQ:EBAY)!
The online giant has one less verb in its portfolio with the sale of a 70% chunk of Skype, but the one-two punch of PayPal and the company's marketplace businesses served the dot-com survivor well during the fourth quarter.
Granted, the results weren't as spectacular as the $1.02-per-share quarterly profit suggests. Most of that amount came from the gain on the Skype sale. On a non-GAAP basis, earnings clocked in at a more feasible $0.44 a share. The adjusted showing is still better than the $0.41 a share it earned a year ago and the $0.40 a share that analysts were targeting.
The 16% spike in revenue to $2.4 billion also begs for a little more clarification. On one hand, the results are understated because eBay was down to just a 30% minority stake in Skype by mid-November. Exclude Skype from both periods, and revenue climbed at a healthier 19% clip. The flip side is that it's not all organic. PayPal's 28% year-over-year revenue spike is real and spectacular, but the 15% uptick in marketplace revenue also includes the recent acquisition of South Korea's Gmarket.
To be fair, the gross merchandise volume moving through eBay's marketplace division soared by 24% over the previous year's depressed showing. There is more to this metric than the namesake auction site, but it's still encouraging.
I read some reports last night crediting eBay's marketplace success to the holiday season, but that's off the mark. It's true that eBay.com has been pushing fixed-price listings over its original adrenaline-pumping auctions. Over the past year, the value of items successfully sold through auctions fell by 3% on a foreign exchange neutral basis, compared with a 35% spike in fixed-price items.
However, this is never going to be Amazon.com (NASDAQ:AMZN) with its dependable deliveries. Regardless of favorable feedback ratings, it's still hard to bank Christmas on a faceless seller. Perhaps that's why eBay's year-over-year 15% gain on the top line of its marketplace division is greater than the mere 7% sequential gain.
eBay's guidance for 2010 is comforting, with revenue ex-Skype climbing 9%-12% higher and earnings growing 11%-14% to between $1.63 a share and $1.68, but don't cheer too loudly. The company still earned more than that in 2008.
Despite the caveats and asterisks, it was still a monster quarter for eBay. This is the first time in more than a year that it has posted year-over-year revenue gains on the marketplace side. PayPal is also a steady beast. More than $20 billion in payment volume was transacted through PayPal during the quarter.
There's just no point in competing against PayPal at this point. Google (NASDAQ:GOOG) is still giving it the good old college try with Google Checkout, but it may as well learn the lessons from vanquished rivals including Yahoo! (NASDAQ:YHOO), Wells Fargo (NYSE:WFC), and Citigroup's (NYSE:C) C2it. Those behemoths stumbled, and that was when PayPal was much smaller. What makes Google -- or even American Express (NYSE:AXP), with its recent Revolution Money gulp -- think it can compete today?
Between the continued success at PayPal and an apparent turnaround process under way at eBay.com, it's time to believe in eBay again.
What did you think of eBay's report? Share your perspective in the comments box below.
