UPDATE 3-EBay warns of weaker 2008 results amid CEO change

(Recasts, adds background and pricing changes, analyst quote)

By Eric Auchard

SAN FRANCISCO, Jan 23 (Reuters) - EBay Inc (EBAY.O) warned that 2008 results would fall below Wall Street expectations, sending its shares more than 5 percent, even as it confirmed long-serving Chief Executive Meg Whitman would step aside.

The warning accompanied solid fourth-quarter results, and analysts said it was unclear if the company feared an economic slowdown or whether management was giving itself room to make changes to revitalize the business. Growth in the main auction business has slowed during most of the past three years.

Auctions chief John Donahoe will take over from Whitman at the end of March. He told a conference call with investors that eBay would cut sellers' fees, which would reduce revenue temporarily, but stimulate long-term growth. Overall growth in e-commerce will slow in 2008, executives cautioned.

"We are going to make breaks from the past," Donahoe told investors on a conference call to discuss recent results.

The share fall erased most of the day's gain. EBay shares closed up 6.7 percent at $28.94 in regular Nasdaq trading on news the CEO change was imminent, but before the results. After the report, the stock fell 5.6 percent to $27.58 in extended trading. The price has fallen by half from a peak in late 2004.

"Problems that were weighing on eBay continue to weigh on eBay," said analyst Jim Friedland of brokerage Cowen & Co.

"There are much more options to sellers on the market ... many of which are cheaper to sellers," the analyst said of online retail alternatives such as Amazon.com Inc (AMZN.O) or independent sites that rely on ads to drive traffic to them.

For the current quarter ending in March, eBay said it expected revenue of $2.00 billion to $2.05 billion -- well below Wall Street's average forecast of $2.14 billion, according to Reuters Estimates. First-quarter analyst forecasts had varied between $2.10 billion and $2.21 billion.

"Consumers are clearly being more conservative," Whitman said in a joint interview with Donahoe on cable television channel CNBC. "I anticipate we will see an increase in casual sellers who are supplementing their income."

The San Jose, California-based company expected 2008 revenue of $8.50 billion to $8.75 billion, which at its midpoint represents growth of 12 percent -- far below the $9.02 billion, or 18 percent, growth analysts had expected on average.

"We intend to be in a stronger position coming out of '08 than we were coming in," Donahoe told investors on a conference call to discuss the quarterly results.

The dour outlook came as eBay posted a 53 percent surge in fourth-quarter net profit, comfortably ahead of forecasts.

Net income jumped to $531 million, or 39 cents per diluted share, from the year-earlier quarter's $346.5 million, or 25 cents per diluted share. Excluding one-time items, the latest quarter's profit was $611 million, or 45 cents a share.

Analysts had expected 33 cents per share, on average, according to Reuters Estimates, but excluding one-time items and stock-based compensation, the average was 41 cents.

Fourth-quarter net revenue rose 27 percent to $2.18 billion, against an average forecast of $2.14 billion.

That growth was led by non-auction businesses, including eBay's retail-like "fixed price" shopping sites; PayPal, which had revenue growth of 35 percent; online ticketing site StubHub; Web-based phone company Skype; and classified ads and other advertising.

But the company said full-year 2008 net earnings, excluding one-time items and option expenses, are expected to range from $1.63 to $1.67 per diluted share -- at or below the Wall Street average forecast of $1.67, according to Reuters Estimates.

"We are clear about the challenges we have ahead of us," Chief Financial Officer Bob Swan said on the conference call.

Cash, cash equivalents and investments leaped to $5.04 billion at the end of 2007 from $3.50 billion a year before. Swan said he was ready to use the company's balance sheet to invest in improvements across its business units.

EBay plans to cut the fees it charges sellers across auctions in its three biggest markets -- the United States, Germany and Britain, executives told investors. Next week, eBay will announce changes in the pricing of its services and improvements in the way buyers can rate sellers, Donahoe said.

Responding to complaints by its key network of auction sellers, eBay plans to reduce the upfront fees sellers must pay to insert new listings on its auction sites, along with reductions in the final transaction fees they pay on successful sales, according to a company presentation on eBay's site. (Additional reporting by Anupreeta Das in San Francisco, Gina Keating in Los Angeles and Michele Gershberg in New York; Editing by Braden Reddall/Editing by Andre Grenon)