eBay beats expectations; calls PayPal a "gem" and Skype a "killer" app

Updated: eBay reported second quarter earnings today, beating Wall Street's expectations with revenues of $2.2 billion, up 20 percent from the second quarter of 2007. It reported non-GAAP profits of $568 million, or 43 cents per share. GAAP profits were $460 million, or 35 cents per share. Wall Street had expected revenue of $2.17 billion and 41 cents earnings per share.

For the third quarter (summary, Techmeme), the company expects adjusted non-GAAP earnings of 39-41 cents per share on revenue of $2.1 billion to $2.15 billion. Its full-year guidance was also adjusted to revenues of $8.8 billion to $9.05 billion, up slightly from the previous guidance of $8.7 billion to $9 billion. Non-GAAP EPS was adjusted to $1.72-$1.77, compared to the previous guidance of $1.70-$1.75. Shares of eBay closed up $1.21 at $28.10 in regular trading but dropped as much as 7 percent in after-hours trading, down $1.91 to $26.91.

For the second quarter, the company highlighted growth in both the Skype and Pay Pal divisions and executives noted that a series of changes have improved both buyer and seller experiences. Chief Executive John Donahoe called it a strong quarter and said, "We have made bold moves across the eBay marketplace to accelerate long-term growth" even in a tough economy.

The company said enhanced the safety of its online marketplaces, including new rewards and discounts for power sellers and increased protections for customers using PayPal, which Donahoe called "a gem." PayPal had revenue of $602 million, a 33 percent year-over-year increase, which was attributed partially to increased penetration across eBay. "What's clear is that PayPay and eBay clearly benefit from each other," Donahoe said.

The company highlighted its sixth consecutive quarter of growth for Skype, noting the a 54 percent year-over-year growth of registered users, as well as a 38 percent increase in Skype-to-Skype minutes and 42 percent jump in SkypeOut minutes, compared to the same quarter a year ago. Revenue at Skype was up 51 percent to $136 million.

Donahoe called Skype "a killer communications application," and made note of the free peer-to-peer video service that is used on more than 25 percent of Skype's calls.

Other highlights of the second quarter include:

• The number of active users on eBay for the quarter was 84.5 million, an increase of one percent over the same quarter last year.
• The number of new eBay listings for the quarter was up 19 percent from a year ago, to 667 million.
• The company repurchased about 19 million shares of outstanding common stock for the second quarter for about $566 million.
• eBay's cash and cash equivalents totaled $3.7 billion at the end of the quarter, compared to $4.22 billion at the end of 2007.
•  eBay Motors, the online vehicle resale marketplace, was flat for the second quarter. The company said the lack of growth was partially because of the economic impact on the overall automotive industry. The motors division was up 7 percent last quarter.
• The number of eBay stores was down 15 percent over last year, to 552,000.
• PayPal payments on eBay were up 26 percent over the same quarter last year, to 211 million.
• Skype launched version 4.0 in Beta, with a major redesign of its interface.