EBay Profit Increases on New Selling Fees, PayPal

EBay Inc., the world's largest Internet auctioneer, posted first-quarter profit that rose more than analysts estimated on higher selling fees and increased revenue from its PayPal payment service.

The online retailer forecast annual sales and profit that were more than its projection in January.

International revenue rose 32 percent, helped by the dollar's decline and Europeans buying goods from the U.S. EBay raised fees for completed sales and lowered the price of listing items to attract a better selection of merchandise. Chief Executive Officer John Donahoe, who replaced Meg Whitman on March 31, is trying to improve buyers' experiences to compete with Amazon.com Inc. as an all-purpose online store.

``Essentially, they're doing the small things right and sticking to their knitting,'' Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Co. in New York who recommends buying the shares, said yesterday. Donahoe ``has pushed forward things for the benefit of the buyer, which is essential to EBay's future, by addressing issues of fraud and buyer discomfort.''

Net income climbed 22 percent to $459.7 million, or 34 cents a share, the online retailer said yesterday in a statement. Revenue climbed 24 percent to $2.19 billion for the three months ended March 31.

Excluding some costs, EBay exceeded estimates by 3 cents.

Shares Rise

EBay, based in San Jose, California, rose 28 cents, or 0.9 percent, to $32.40 in Frankfurt trading as of 11:21 a.m. German time. The online retailer has fallen 3.2 percent this year before today, compared with a 19 percent decline by Amazon.com, the world's largest online retailer.

Twenty-two analysts surveyed by Bloomberg estimated average earnings of 39 cents a share. They predicted sales of $2.07 billion. In January, EBay projected so-called adjusted first- quarter earnings of 37 cents to 39 cents a share on sales of as much as $2.05 billion.

``They set the bar very low for the new CEO, and they had to set the bar low because of the uncertainty of the new fee changes,'' Tim Boyd, an analyst with American Technology Research, said in a Bloomberg Television interview from Greenwich, Connecticut. He recommends buying the shares.

EBay projected second-quarter earnings of 39 to 41 cents a share, excluding some costs, in line with analysts' estimates of 40 cents. The retailer projected revenue of as much as $2.15 billion.

Annual profit excluding costs will be $1.70 to $1.75 a share, an increase from EBay's January forecast of $1.63 to $1.67. Revenue may be as much as $9 billion, EBay said, higher than its previous prediction of as much as $8.75 billion.

Slowing Growth

The forecast reflects concern that EBay may be affected by a slowing of growth in electronic commerce, Chief Financial Officer Robert Swan said.

``We do not believe that we are immune,'' Swan said in a phone interview. ``Our sense is that our initiatives are driving the desired benefits, but the underlying economy is slowing.''

Donahoe, 47, joined EBay in 2005 from Bain & Co. He's said his three priorities for the company are improving its fixed- price business, which competes with Amazon.com, growing PayPal and bolstering customer safety and trust.

EBay bought Israeli software company Fraud Sciences Ltd. in January for $169 million to improve PayPal security. In March, EBay said it would fire 125 of its 15,500 employees as part of a global reorganization.

Completed Sale

While slashing listing costs, Donahoe boosted the cost of a completed sale. Customers who sell a $20 baseball card must now pay a fee of $1.75, compared with $1.05 previously, for example. Sellers rated highly by buyers for fast shipping can receive discounts.

The online company is also linking search results to seller ratings and experimenting in Australia with making PayPal a required channel for payment.

Previous changes have angered sellers, some of whom have attempted to organize boycotts of EBay.

``We may have sellers that make some noise and pull some items, but we're absolutely confident we'll improve the buyer experience, and that will make a better and more vibrant EBay,'' Donahoe said in a conference call with analysts and investors.

New listings rose 10 percent to 647.4 million from a year earlier, the second quarterly increase in a row, EBay said.

International revenue climbed at twice the pace in the U.S. Overseas sales make up 53 percent of EBay's revenue and cross- border buying made up 18 percent of merchandise volume.

PayPal revenue climbed 32 percent to $581.6 million as the payment unit signed agreements with JetBlue Airlines and Italy's Ferrari Store.

Revenue from Skype, Ebay's Internet-telephone unit, climbed 61 percent to $126.3 million in the quarter.

Profit was $377.2 million, or 27 cents a share, a year earlier.