eBay posts loss, auctions strengthen

By Eric Auchard

SAN FRANCISCO (Reuters) - EBay Inc said on Wednesday it had a strong quarterly performance in auctions, masked by a big net loss due to a write-down, and that its full-year earnings would be at the top end of expectations.

The third-quarter net loss of $936 million, or 69 cents per diluted share, compared with a year-ago profit of $281 million, or 20 cents per diluted share. The loss stemmed from a $1.39 billion write-down on eBay's takeover of Internet phone service Skype.

But excluding that and other one-time items, the world's largest online auctioneer and payments company posted an adjusted profit of $564 million, or 41 cents per diluted share, representing a 53 percent rise over a year ago.

Wall Street analysts, on average, had been looking for a profit, excluding the Skype write-down and some one-time items, of 33 cents per share, according to Reuters Estimates.

"It was a pretty impressive beat, but obscured by the Skype impairment charges," Sanford C. Bernstein analyst Jeffrey Lindsay said. "Because of the strong results, they've decided to bite the bullet on Skype, which was giving it an overhang of uncertainty."

EBay declined to comment on its 2008 outlook since various positive and negative factors made forecasting at this point difficult. Chief Financial Officer Bob Swan said the need to invest in new business and rapid growth in lower-margin businesses like Skype and online payments service PayPal could hurt margins overall.

Third-quarter revenue rose 30 percent to $1.89 billion, topping the current range of quarterly Wall Street forecasts.

"Results were driven by a combination of somewhat stronger performance in our big markets, as well as newer, faster growing businesses," President and Chief Executive Meg Whitman said, citing its top markets in the United States and Germany.

The company's effective third-quarter tax rate, excluding one-time items, was 10 percent, down from 27 percent in the same quarter a year earlier. Tax benefits arose from a favorable tax ruling tied to prior quarterly periods and a shift in business to more favorable business climates.

About a penny per share of operating earnings came from translating foreign currencies into dollars, she said.

"A good chunk of the over-performance was execution," Whitman said, although the tax benefits, foreign currency gains and eBay's ongoing share buybacks also figured strongly.

Skype had revenue of $98 million in the quarter, up 96 percent from a year earlier, making it the third quarter in a row of profitability for the unit. It has signed up 246 million registered accounts, up 81 percent in a year.

"This is still a rapidly growing business," Whitman said.

PayPal revenue grew 35 percent to $470 million in the quarter.

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