updated 7/21/2005 10:29:14 AM ET 2005-07-21T14:29:14

EBay Inc.’s second-quarter profit eclipsed analyst expectations as the online auction leader brushed aside worries that it may be losing its competitive edge amid strident complaints about everything from rising fees to the fraud controls in its e-commerce clearinghouse.

The San Jose-based company said Wednesday that it earned $291.6 million, or 21 cents per share, for the three months ended in June, a 53 percent increase from $190.4 million, or 14 cents per share at the same time last year.

If not for accounting charges unrelated to its ongoing operations, eBay said it would have earned 22 cents per share. That topped the mean analyst estimate of 18 cents per share, according to Thomson Financial.

Revenue for the period totaled $1.09 billion, a 40 percent increase from last year’s $773.4 million. The volume exceeded the mean analyst estimate of $1.04 billion, which reflected the midrange of the guidance eBay provided in April. All the company’s other key measures, including active users and the amount of merchandise bought on its site, increased by hefty amounts from last year.

EBay released the results after the stock market closed Wednesday.

The pleasant surprise from eBay came the day after another Internet bellwether, Yahoo Inc., disappointed Wall Street by reporting a profit that merely matched analyst expectations .

The second-quarter results could provide eBay with a much-needed lift during what so far has been an extremely tough year. An investor favorite almost as soon as it went public in 1998, eBay has been under fire for the past six months.

The backlash began in January when the company reported quarterly results that fell below analyst expectations. Since then, eBay has faced harsh criticism for raising its merchant fees and for not being more vigilant about weeding out the mischief makers and scam artists who make bogus bids or peddle merchandise without ever delivering the goods.

The backlash has contributed to a 40 percent decline in eBay’s stock so far this year, wiping out $30 billion in shareholder wealth.

EBay management has been aggressively reaching out to many of its disgruntled sellers to address their concerns even as management sought to assure investors that many of the recent criticisms of the company are invalid. The latest quarter will likely provide eBay with even more fodder to rebut its critics.

“What this translates to me is that we have built a selling platform that has become even more efficient,” eBay’s chief financial officer, Rajiv Dutta, said during an interview Wednesday.

In a sign of the company’s optimism, eBay raised its outlook for the rest of the year. Management forecast 2005 revenue of $4.3 billion to $4.4 billion, including as much as $1.05 billion in the current quarter. Excluding accounting items unrelated to it ongoing business, eBay expects 2005 earnings of 82 cents or 83 cents per share, above the current analyst estimate of 79 cents.

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