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eBay revenue shrinks for first time in history

Profits plummet 31 per cent

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In the fourth quarter, for the first time in its history, eBay saw a decline in year-over-year revenue.

"We're not happy about that," CEO John Donahoe told analysts and reporters during the requisite conference call announcing the company's Q4 results.

For the quarter ending December 31, eBay pulled in sales of $2.04bn, a 6.6 per cent drop from the same quarter last year. Meanwhile, profit tumbled 31 per cent to $367.2 million, or 29 cents a share

Excluding certain one-time items, earnings came in at 41 cents a share, down from 45 cents. And that beat the prognostications of Wall Street prognosticators. Following the company's earnings announcement, eBay shares dropped 4.5 per cent in after hours trading, but at last check, they were up 0.73 per cent to $13.28.

Donanhoe and company blamed their Q4 results on a weakened worldwide economy - and a strengthened US dollar. "Clearly, we've been operating in an almost unprecedented external environment," he said. "There's no doubt ebay was impacted by the macroeconomy, and our fourth quarter results reflect this."

Gross merchandising volume - or GMV, the sum of all auctions closed on eBay during the quarter - shrunk 12 per cent, after shrinking for the first time in Q3. This translates to a 16 per cent revenue drop for the company's Marketplace unit, which includes eBay-branded sites as well as sister sellers like StubHub, Shopping.com, Kijiji, and others.

eBay was the web's most visited site during the December holiday season, with over 85.4 million visitors, according to those clever researchers at comScore. But that's a 4 per cent drop from last year.

But the quarter was kind to eBay's Payments unit (spearheaded by PayPal) and the Communications unit (Skype). Payments pulled in revenue of $623m, an 11 per cent increase from 2007, thanks in part to the recent acquisition of instant-credit outfit Bill Me Later. Active payment accounts reached 70 million during the quarter, a 23 per cent increase, and Donahoe said that for the first time, PayPal dollar volumes off eBay exceeded those on.

Meanwhile, the Communications unit nabbed $145m in revenues, a 26 per cent increase. Skype added 35 million users during the quarter, bringing the total population of Skypeland to 405 million.

eBay predicts that in Q1, revenues will fall somewhere between $1.8bn and $2.01 billion, or 32 to 34 cents a share. The Wall Street guessmen, for what it's worth, were looking for 40 cents a share guesstimate.

In October, as it spent between $70m and $80m acquiring Bill Me Later and two Danish classified outfits, eBay announced it would lay off 1,000 from a staff of 16,000. ®

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