For eBay, Good Isn't Good Enough

Revenue from the company's core U.S. auction site, for instance, grew at a 32% clip in the quarter. A strong rate to be sure, but it marked the slowest quarterly growth for the business segment in more than two years. In the second quarter last year, eBay's domestic auction revenue grew by 45%.

Similarly, despite the company's recent expansion into India and China, the growth rate of its international auction business was nearly cut in half from the second quarter last year. In the just-completed quarter, eBay's international transaction revenue grew by 76%. Last year, that business segment's sales grew by 146%.

Perhaps just as disturbing for a company valued for its rapid growth, several of its key financial metrics actually declined on a sequential basis from the first quarter. The company's net income, for instance, shrank 5% from the previous quarter. Revenue from eBay's core U.S. auction site fell by about 2% vs. the first quarter to $319.11 million. And the value of all the goods sold dropped by less than 1% to $8.01 billion.

Each of those declines is a relative novelty for a company known for growing revenue and earnings, not only year to year, but from quarter to quarter.

On this sequential basis, the company's payments and international segments also showed slowing growth. Revenue from eBay's PayPal division grew by just 2% from the first quarter to $158.82 million. In contrast, PayPal's revenue grew by 7% sequentially in the second quarter last year.

Likewise, sequential sales growth from eBay's international auction sites slowed to 6%, less than half the 13% quarter-over-quarter growth recorded in the second quarter last year.

On a conference call with analysts, eBay CEO Meg Whitman said the company is increasingly being adopted by everyday consumers. As the company's business becomes more mainstream, she said, its financial results have increasingly reflected the seasonality seen by brick-and-mortar retailers.

"There's no question that our seasonal trends are more pronounced," Whitman said.

The company is looking for much stronger growth in its fourth quarter this year and first quarter next year, noted CFO Rajiv Dutta. Still, that may be little consolation to investors. Increased seasonality is generally a strong sign of a maturing business.

eBay's stock closed regular trading at $76.60, off $3.35, or 4.2%.

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