By Alexandria Sage
SAN FRANCISCO (Reuters) - Online auction leader eBay Inc gave a disappointing forecast that promised little holiday cheer and said it was suffering from a widespread consumer spending slowdown that would drag on into 2009, sending its shares down 3.5 percent.
The after-hours sell-off extended the stock's 14 percent drop in the regular session on Wednesday, fueled by investor concerns the company would be hit hard by a global recession as it tries to woo back buyers and sellers. The stock is down 38 percent this year.
"There is a high degree of economic uncertainty and turmoil in the business market and this is impacting consumer spending, and we're seeing an impact across all of our platforms," Chief Executive John Donahoe said on a conference call, saying the turmoil would continue into 2009.
Besides its main business of auctions and other marketplace sites, eBay operates its Web payments services PayPal and Web-based call service Skype.
Since August, consumers have been cutting back on a wide array of goods and services, eBay said, whether on PayPal, tickets for sporting events and concerts through its StubHub division or in vehicles.
EBay said a relatively stronger U.S. dollar, recent acquisitions and a touch economic environment were reflected in its lowered 2008 outlook, and executives cited the "uncertainty in global consumer spending."
The company cut its full-year revenue forecast to a range of $8.53 billion to $8.68 billion, below its previous estimate of $8.8 billion to $9.05 billion.
It forecast adjusted earnings for the fourth-quarter, usually its strongest period due to holiday sales, to 39 cents to 41 cents per share. That was well below a Wall Street view of 47 cents per share and was lower than a year ago.
"Your fourth-quarter guidance seems to imply really no Christmas," Goldman Sachs analyst James Mitchell told eBay executives during the call.
Also hurting eBay's results is the recent relative strength of the U.S. dollar because some 53 percent of sales come from abroad. 2008 revenues are expected to be $200 million lower than previously expected, eBay said, due to the roughly 10 percent gain the dollar has made against the euro and the British pound.
The weak economy, and renewed marketing efforts to spur buying and selling will crimp revenue by another $150 million.
To counteract slower growth over the past three years in auctions, which comprise the bulk of its business, eBay has lowered upfront listing fees and issued coupons to lure buyers who have gravitated to competitors like Amazon.com Inc and Craigslist. The company said last week it would cut 10 percent of its work force.
"Their core marketplace continues to struggle and the economy is not helping the situation," said Ryan Jacob, a portfolio manager of the Jacob Internet Fund, which holds a small position in eBay.
Still, one indicator suggested recent efforts to stimulate growth were gaining traction -- new listings on eBay's marketplaces sites rose 26 percent in the third quarter. At the same time, some analysts pointed to the 1 percent decline in gross merchandise volume, which measures the value of goods for sale on eBay -- the first time it had ventured into negative territory.
Ongoing marketing efforts will help drive demand for goods available for sale on eBay, Donahoe said, citing eBay's wide selection and low prices as a competitive advantage.
THIRD QUARTER BEATS VIEW
EBay reported a third-quarter net profit of $492 million, or 38 cents per share, from a year-earlier loss of $936 million, or 69 cents per share, when it took a $1.4 billion write-down for its Web telephone service Skype.
Total revenue rose 12 percent to $2.12 billion.
On an adjusted basis, earnings were 46 cents per share, above the average analyst view of 41 cents per share.
Third-quarter revenue grew 4 percent in eBay's main marketplaces business, which includes auctions. Revenue rose 27 percent to $597 million at PayPal -- below the mid-30s percentage range it has seen in the past four quarters -- and grew 46 percent to $143 million at Skype.
Shares of eBay trade at over 10 times projected 2008 earnings, at a discount to Google Inc at nearly 20, Yahoo Inc at 32 and Amazon.com at 41.
EBay shares fell to $14.79 in extended trade after closing at $15.33 on Nasdaq.
(Additional reporting by Eric Auchard, editing by Richard Chang)