updated 1/19/2005 4:52:22 PM ET 2005-01-19T21:52:22

Strong holiday sales caused eBay Inc.’s profit to surge 44 percent from the same period last year, and optimistic executives raised their outlook for the rest of 2005. But the online auction giant failed to meet Wall Street’s expectations by a penny per share and its shares fell.

Ebay, one of the world’s largest e-commerce companies, announced fourth-quarter earnings Wednesday of $205.4 million, or 30 cents per share, compared with $142.5 million, or 21 cents per share in the same period of 2003.

Excluding special items, eBay earned $226 million, or 33 cents per share, up from $157 million, or 24 cents per share, in the fourth quarter of 2003.

For the three months ended Dec. 31, eBay reported fourth-quarter revenue of $935.8 million, up 44 percent from $648.4 million in the year-ago period.

Analysts expected the San Jose-based company to earn 34 cents per share on sales of $934.17 million.

Throughout 2004, eBay earned $778.2 million, or $1.14 per share, on sales of $3.27 billion. In 2003, the company earned $441.8 million, or 67 cents per share, on sales of $2.17 billion.

EBay — considered one of the most financially conservative companies in Silicon Valley — boosted its outlook for the rest of the year based in part on hopes for new acquisitions, including a Dutch auction company and Rent.com. EBay purchased the privately held Santa Monica, Calif.-based real estate firm last month for about $415 million in stock and cash.

EBay expects 2005 sales as high as $4.35 billion, including $1.03 billion in the current quarter. It expects to earn up to $1.41 per share, including as much as 33 cents in the first quarter.

Meg Whitman, eBay president and chief executive, called 2004 an “outstanding success” that generated “tremendous momentum” for 2005.

“I’m more confident than ever that the decisions and investments we’re making today will ensure a bright future for the company and our community of users around the world,” she said.

EBay also announced Wednesday a two-for-one stock split effective Feb. 16 for shareholders of record on Jan. 31.

Online marketplace eBay Inc. said on Wednesday quarterly profit rose 44 percent, helped by growth in its PayPal service, and announced a two-for-one stock split.

Fourth-quarter net income increased to $205.4 million, or 30 cents per diluted share, from $142.5 million, or 21 cents, a year earlier. Net revenue rose to $935.8 million from $648.4 million.

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