Are press release headlines supposed to be funny?
"eBay Inc. Announces Three-Year Roadmap for Growth," reads last night's header.
Did you think that you would ever again see "eBay" and "growth" in the same sentence? After all, the company is coming off a quarter when revenue and earnings fell by 7% and 14%, respectively. PayPal and Skype are still growing, but the company's namesake marketplace is struggling like the last season of Full House.
eBay's (NASDAQ:EBAY) three-year outlook is refreshing to see, but it's still worth a chuckle even if you strip out the "growth" component from the headline. Having "three-year roadmap" and "eBay" in the same sentence is hilarious, and I guess I'm breaking the cardinal rule of comedy if I have to explain the joke.
See, two months ago, three verbs walked into a bar. This bar was actually the company's fourth-quarter earnings report. The company has historically provided a glimpse into what the year ahead has in store for shareholders, but not this time. eBay flipped off its high beams and only provided a near-term outlook for the second quarter.
So how are investors supposed to take a three-year outlook seriously when the company isn't even comfortable with its public visibility through 2009?
Going dark
Don't take it from me. Take it from the company.
"Historically, we've given full-year guidance on our Q1 call and will not be doing so today," the company said during January's conference call. "The uncertain and unprecedented economic environment, coupled with the volatile currency movement, make it difficult to provide any meaningful outlook beyond the first quarter."
So while every other media outlet is probably kicking off its coverage with the actual metrics, I'm here to tell you that they're burying the lead. The real story is that the 2011 targets are bogus, because eBay has already spoiled the movie for you when it conceded that there is no "meaningful outlook" beyond this quarter.
I'll give you the numbers, anyway.
It sees revenue of $10 billion to $12 billion in 2011. That may not seem like much of a step from the $8.5 billion it rang up last year, but revisit eBay's guidance for the current quarter. It's going to be scarier than the holiday quarter, with revenue falling by 6% to 18% with an even steeper decline in profitability. Analysts who get paid to look beyond March see revenue falling by 6% for all of 2009. In other words, eBay has some serious ground to make up.
eBay may as well hit its namesake site for a new calculator while we're at it. It arrives at $10 billion to $12 billion by adding up its three verb-worthy segments.
- PayPal will generate between $4 billion to $5 billion of revenue in 2011, up sharply from $2.4 billion in 2008.
- Skype will ring in with $1 billion in revenue in 2011, roughly doubling last year's tally.
- eBay's marketplace business will clock in between $5 billion to $7 billion in 2011 revenue, up slightly from $4.7 billion in 2008.
Add up the low end of the ranges and you get $10 billion, but the high end is actually $13 billion (not $12 billion). Is this simply a rounding error or did the eBay range get bumped an extra $1 billion higher so it wouldn't appear so anemic?
I won't bother to speculate because you already know how I feel about these flawed high beams.
It's bad enough that eBay got spanked by Amazon.com (NASDAQ:AMZN) over the holidays. It has to sting that smaller foreign marketplaces like Gmarket (NASDAQ:GMKT) and MercadoLibre (NASDAQ:MELI) are actually growing these days.
At today's prices, it's easy to be drawn to eBay. Despite the setbacks at its namesake site, PayPal remains the rock star of micropayments. Skype has been a little trickier to monetize, but it's insanely ubiquitous. The company's real problem -- beyond its hypocritical roadmap and flaky math -- is eBay.com itself. If it can turn it around, the sky's the limit.
For now, unfortunately, the sky is still falling.
More items in the eBay bid basket:
- The company's latest quarterly report was a dud.
- Things just haven't been the same since Meg Whitman went away.
- It's So Much Worse Than You Think
