eBay Q4: "Letting Go of a Very Successful Past"
We had to create a mind shift at our company–we had to think bold and not just incremental. We had to create a vision of the future so people could let go of a very successful past.”
– eBay CEO John Donahoe, Sept. 2007, Legg Mason Capital Management
Good thing Wall Street’s expectations for eBay’s fourth-quarter earnings are low, because the online auctioneer is gearing up to post what many believe will be its first quarterly revenue decline in nearly 10 years. With its auction business slowing and the deepening recession playing havoc with its now year-old turnaround plan, 2008 has been a challenging year for eBay (EBAY). So much so that analysts expect the company’s earnings per share to drop 11 percent for the quarter. They’re calling for eBay to report earnings of 40 cents a share on revenue of $2.1 billion, according to consensus estimates from FactSet Research. Worse, they’re predicting eBay’s gross merchandise volume–the total value of all goods sold over the site–will have fallen 5 to 10 percent year over year.
Which is odd, since one would think that the GMV would rise during these financially uncertain times as consumers visit the online auction site in hopes of stretching their shrinking budgets or simply to sell something off to make ends meet. Seems eBay’s pricing and payment changes, bemoaned by longtime sellers and buyers alike, has had a deleterious effect on the online auctioneer. Both have been abandoning eBay for rivals like Amazon. Just how many have departed will become clear on Wednesday when eBay posts earnings.
“[The fourth quarter] has been a difficult quarter for eBay, which has been implementing a turnaround strategy in one of the worst consumer environments since World War II,” Sanford Bernstein analyst Jeff Lindsay wrote in a recent research note. “Although online consumer spending held up better than expected–with the consumer pulling out the last of the stops for the holiday season–we think the lion’s share of that benefit went to Amazon.”
What was it that Donahoe said again? We had to create a vision of the future so people could let go of a very successful past. Mission accomplished, I guess.
[Image Credit: Legg Mason Capital Management]