EBay profit falls on lower revenue

The recession continued to take its toll on eBay Inc. in the second quarter, as a sales decline dragged down earnings and revenue, overshadowing growth in its Skype communication unit.

EBay said it earned $327.3 million US, or 25 cents per share, in the April-June period, a 29 per cent decrease from $460.3 million, or 35 cents per share, a year earlier. It's the third straight quarter of decreasing profits for the online auction pioneer.

Shares of San Jose-based eBay rose 81 cents, or 4.2 per cent, in extended trading after the results were released Wednesday. It finished regular trading up 52 cents, or nearly three per cent, at $19.45.

Revenue fell five per cent to $2.1 billion, slightly ahead of analysts' estimates of $1.99 billion.

Revenue from eBay's marketplaces unit, which includes eBay, Shopping.com and other e-commerce websites, sank 14 per cent to $1.26 billion a decline the company attributed to the weak economy and strength in the U.S. dollar. When the dollar is stronger, transactions in other currencies translate into fewer dollars.

The company's payments unit, which includes online payment service PayPal and short-term credit service Bill Me Later, saw revenue climb 11 per cent to $669.3 million.

Skype IPO planned

Revenue from online telecommunications service Skype jumped 25 per cent to $170 million. EBay said in April that it plans to spin Skype off in the first half of 2010 through an initial public offering, unwinding the $2.6 billion acquisition it made in 2005. The companytook a $900 million writedown on Skype in 2007, essentiallyacknowledging it had significantly overvalued it.

The company is also trying to resolve a dispute with Joltid Ltd., which was founded by Skype founders Janus Friis and Niklas Zennstrom and owns the peer-to-peer technology that Skype licenses for its software.

EBay's gross merchandise volume which measures the value of all transactions on eBay, excluding vehicles fell 10 per cent to $11.13 billion for the quarter. The number of active users, an indicator of how well the company is able to attract new buyers and sellers, inched up just two per cent to 88.4 million.

The company continued to work on attracting and keeping buyers and sellers during the quarter, including eliminating some upfront selling fees to encourage greater use by casual sellers.

For the current quarter, eBay forecast a profit of 22 cents to 24 cents per share, or 34 cents to 36 cents on an adjusted basis, on $2.05 billion to $2.15 billion in revenue. Analysts were looking for a profit of 35 cents per share on $2 billion in sales.