EBay loses $936 mil in Q3 due to Skype
EmptySAN FRANCISCO -- EBay Inc. reported Wednesday a third-quarter net loss of more than $936 million -- a rare plunge into the red for the e-commerce juggernaut caused by previously announced charges to its Skype telecommunications division.
But San Jose-based eBay still easily exceeded Wall Street's expectations for the quarter ended Sept. 30, thanks to record revenue of $1.89 billion, up 30% from the year-ago quarter.
Executives credited record revenue at the PayPal electronic payment division, and brisk sales outside of the United States and at ticket broker StubHub.com.
Early this month, eBay announced it would take a $900 million write-down in the value of Skype. That charge, for what accountants call impairment, essentially acknowledged that eBay executives drastically overvalued the $2.6 billion Skype acquisition, completed in October 2005.
EBay also said on Oct. 1 that it paid certain Skype shareholders $530 million to settle future obligations -- a one-time payment known as an "earn-out."
Including the Skype charges, eBay lost $936.6 million, or 69 cents per share in the third quarter. In the year-ago quarter, the online auction company earned $280.9 million, or 20 cents per share.
It was the first time the company reported a loss since the second quarter of 1999, eBay President and CEO Meg Whitman said.
Not counting Skype charges, stock-based compensation expenses and other one-time costs, eBay earned $563.8 million, or 41 cents per share, up 53% from $367.4 million, or 26 cents per share, in the year-ago quarter.
On that basis, which does not comply with generally accepted accounting principles, analysts polled by Thomson Financial expected eBay to earn $456.26 million, or 33 cents per share, on revenue of $1.83 billion.
EBay bought back 14.8 million shares of its stock for $500 million last quarter, part of a $2 billion repurchase program continuing through January 2009.
Whitman characterized the quarter as "strong" but was quick to acknowledge problems with Skype.
Skype co-founder and chief executive, Niklas Zennstrom, stepped down Oct. 1, when eBay announced the impairment charges. EBay chief strategy officer Michael van Swaaij, formerly vice president for European operations, is acting Skype CEO.
"We are disappointed -- obviously -- by the write-down, and we're behind in terms of some financial metrics we had originally anticipated," Whitman told The Associated Press in a phone interview. "But the steps we took ... and moving to new management was completely the right thing to do. I actually feel confident in the business longer term."
Whitman said, however, there was little she or other executives could have done differently in 2005 to offer an acquisition price that more accurately reflected the company's value.
"We put together a set of projections based on what we believed at the time," she said. "It's always hard to forecast growth of a 2-year-old. It's now a 4-year-old and it's almost the fastest startup in the Internet. It didn't hit the internal milestones we had hoped for, but I do hope the ability to get the earn-out out of the way and reorient the strategy may be back on track."