Earnings Preview: EBay reports 4Q on Wednesday

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SAN FRANCISCO (AP) — Online marketplace operator eBay Inc. reports its fourth-quarter results Wednesday. The following is a summary of key developments and analyst commentary related to the period.

OVERVIEW: During the fourth quarter, eBay weathered a holiday shopping season that was much brighter overall than a year ago.

According to data from market research firm comScore, e-commerce sales from Nov. 1 to Christmas Eve rose 5 percent over 2008. During the same period, overall retail sales rose 3.6 percent, according to MasterCard Advisors’ SpendingPulse.

This growth compares with a drop in sales on and off the Web a year earlier.

EBay tried to lure customers by focusing on holiday deals from sellers that included free shipping and guaranteed returns on new items. It also promoted products that were new but not the latest model, emphasizing another way shoppers could get name-brand products at steep savings.

Also during the quarter, eBay wrapped up the sale of its Internet phone service, Skype, in November for about $2 billion to an investor group that includes the founders of the service. Just before that, eBay settled a legal fight over critical software with Skype co-founders Niklas Zennstrom and Janus Friis that cleared the way for completion of the deal.

EBay sold 70 percent of Skype for about $1.9 billion plus $125 million it will get at a later date. It is keeping the remaining 30 percent.

BY THE NUMBERS: In October, eBay forecast fourth-quarter earnings of 28 cents to 30 cents per share, or 38 cents to 40 cents per share when excluding special items. The company also predicted $2.2 billion to $2.3 billion in revenue.

Analysts polled by Thomson Reuters are looking for adjusted earnings of 40 cents per share on $2.29 billion in revenue.

Last year, eBay earned 29 cents per share, or 41 cents per share on an adjusted basis, on $2.04 billion in revenue.

ANALYST TAKE: In a recent note to investors, Lazard Capital Markets analyst Colin Sebastian predicted that online holiday season spending and increased use of online payment service PayPal by non-eBay sellers helped stimulate growth at PayPal.

He also thinks eBay’s marketplace grew, but said it still has a “long road to recovery.” Over the past two years, eBay has concentrated on improving its faltering marketplace business, working to build buyers’ trust and clean up the look of its Web site.

Sebastian, who has a “Buy” rating and $29 price target for the stock, expects adjusted earnings of 39 cents per share on $2.27 billion in revenue.

“Longer term, we expect eBay will emerge as a smaller, more nimble, and highly profitable platform for online commerce,” he said.

WHAT’S AHEAD: Some analysts think eBay will roll out another round of marketplace changes in the next few weeks that could include adding listings from eBay merchants’ on-site stores to its main search results and tweaks to its search results.

“In general, we expect eBay to continue nurturing larger merchants as it seeks to capture a greater share of secondary transactions,” Sebastian said.

STOCK PERFORMANCE: Shares remained virtually unchanged during the quarter, finishing at $23.53 on Dec. 31.