Ebay on Wednesday posted its second consecutive quarterly drop in profits and revenues, but the e-commerce bellwether’s financial results managed to beat analysts’ forecasts.
The first quarter financial results helped the company’s shares soar by 79 cents, or 5.4 percent, in after-hours trading, after they finished the day’s trading session up 49 cents, or 3.4 percent, at $14.78.
In its first quarter results, the company’s profits were $357 million, or 28 cents per share, declined by 22 percent from $459.7 million, or 34 cents a share, posted by the company for the same period a year ago.
However, excluding some items, the profits were 39 cents a share, beating analysts’ forecasts of 34 cents a share by a considerable margin. Revenues for the first quarter were $2.02 billion, beating analysts’ forecasts of $1.94 billion, but down by 8 percent from $2.19 billion from a year earlier.
The company attributed this notable decline in its profits to shaky economic situation and strengthened dollar. Ebay’s marketplace has been hit hard by a slump in e-commerce spending, with its marketplace segments, which includes StubHub and Shopping.com, registered a drop by 18 percent to $1.22 billion.
However, eBay’s payment unit, which includes the widely popular PayPal service, rose considerably by 11 percent to $643 million. Furthermore, eBay’s internet phone service, Skype, also registered gains, with its revenues rose to $153 million from $120 million in the last quarter.
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Ironically, as the economy gets a battering, one would expect Ebay to be surfing the recession waves. This ain't happening for a number of reasons though. Customers are actually cutting back on costs; any costs. You can't buy groceries on Ebay for the time being and while Ebay rightly believed that people would start unloading their unwanted stuff on the auction website, it has created a glut of offers that's pushing prices - and profits - down.