EBay Inc. delivered a second-quarter profit that fulfilled analysts' expectations Wednesday, but the online auctioneer signaled it isn't content with the status quo by raising some of its listing fees and committing to buy back up to $2 billion worth of its slumping stock.
The San Jose, Calif.-based company said it earned $250 million, or 17 cents per share, for the three months ended in June. That represented a 14 percent decrease from $291.6 million, or 21 cents per share, at the same time last year.
It wasn't an apple-to-apples comparison because of new accounting rules that require publicly held companies to record the costs of employee stock options much differently than last year.
If not for this year's accounting revisions, eBay said it would have earned 24 cents per share _ a figure that matched the average estimate among analysts surveyed by Thomson Financial.
Revenue for the period totaled $1.41 billion, a 30 percent increase from $1.09 billion a year ago. The revenue also met analysts' expectations.
Excluding its stock option expenses, eBay forecast third-quarter earnings one to two cents below the current average analyst estimate of 24 cents per share. That conservative stance is a familiar one for eBay, which has always cautiously managed Wall Street's expectations.
But the company made it clear it isn't standing pat, with its stock price drooping 55 percent below where it stood at the end of 2004. EBay's shares fell 66 cents to close at $25.93 on the Nasdaq Stock Market before the earnings were released, then dipped by a penny in extended trading.
Beginning Aug. 22, eBay said it will raise a variety of fees for merchants operating online stores on the site. The change, affecting an area called "store inventory," could apply to up to 541,000 stores worldwide that sell on eBay. The new prices will raise fees by an average of 6 percent for affected merchants, eBay estimated.
The company isn't changing the listing fees for any other format, including the auctions that turned eBay into an e-commerce bellwether. EBay ended June with 203 million registered users, but the company doesn't break down how many of those are sellers.
By raising the costs to operate stores, eBay hopes to push more listings back into the auction format, CEO Meg Whitman said in a Wednesday interview. Store inventory listings represent about 83 percent of the volume on eBay's site but generate just 9 percent of the gross sales volume, according to the company.
The rising store inventory listings have "diluted the magic of eBay," Whitman said. "We are trying to get back to the essence of eBay."
EBay is hoping to bolster its stock by spending up to $2 billion buying back shares during the next two years. It marks the first stock buyback in eBay's nearly eight-year history as a publicly held company.
The amount budgeted for buying back eBay's shares looks minuscule next to the $40 billion in stockholder wealth that has evaporated during the past 18 months.
The downturn reflects concerns about eBay's slackening growth, international competition, and, more recently, how the company's online payment service might be hurt by a rival offering from Internet search leader Google Inc., which is dangling lower processing fees and other incentives to entice merchants.
EBay's PayPal service fared well in the second quarter, generating $330.7 million, a 39 percent increase from the same time last year. PayPal ended June with 114 million accountholders, a 44 percent increase from a year ago.
Whitman said eBay isn't worried about Google hurting PayPal, noting the service already has fended off several other competitive threats. "We are going to innovate as we always have."
EBay also is bracing for a backlash against its forthcoming fee increase, although Whitman suspects the complaints will be less strident than last year when it raised listing fees for a far larger group of sellers.
"Whenever we do a fee increase, our community doesn't like it, but I think they will understand the reasons why are doing this," Whitman said.