San Jose, Calif.-based eBay earned revenues of $4.37 billion for an EPS of 69 cents a share, an increase of 13% year over year. Analysts surveyed by Thomson Reuters expected EPS of 68 cents on $4.38 billion in revenue.
Third-quarter guidance was also below analyst expectations: the company expects third-quarter revenues of $4.3-$4.4 billion and EPS of 65 cents to 67 cents, while the consensus estimates were $4.42 billion and 70 cents, respectively. The expected 2014 revenues of $18-$18.3 billion and EPS of $2.95 $3 were in line with consensus estimates of $18.2 billion on EPS of $2.98. The PayPal division’s revenues rose 20% year-over-year versus 19% in the first quarter.
This quarter has been a difficult one for eBay. In May, for example, a massive hacking forced the company to ask 145 million users to change their passwords. Google’s search algorithm update in May negatively impacted eBay search results rankings. The company also sparred with activist investor Carl Icahn, a shareholder who wanted to spin off PayPal.eBay Sees Deeper Hole in Marketplace Business Microsoft Announces Massive Layoff, Cutting 18,000 Workers "In a challenging second quarter, our commerce and payments platforms delivered strong enabled commerce volume growth of 26 percent," said eBay CEO John Donahoe in a press release. "PayPal generated another strong quarter while eBay's growth was hampered by its global password reset for all users. We continued our momentum in the four competitive commerce battlegrounds of mobile, local, global, and data."
SanDisk (SNDK) shares dropped 12.6% to $94.30 after some of its third-quarter outlook in yesterday’s quarter report fell short of analyst expectations. SanDisk’s revenues grew 10.1% to $1.63 billion, with EPS of $1.41. Analysts surveyed by Thomson Reuters expected revenues of $1.6 billion and EPS of $1.39. However, gross margin fell to 48% in the quarter, from 51% in the first quarter. The flash memory manufacturer’s third-quarter guidance was particularly disappointing: they expect revenues of $1.675-$1.725 billion, also short of analyst estimates of $1.74 billion. "We are pleased to deliver record second quarter revenue in both enterprise and client SSDs, as well as retail products,” CEO Sanjay Mehrotra said in the press release. “SSD solutions comprised 29 percent of our second quarter revenue, compared to 16 percent in the year ago quarter, demonstrating strong progress in driving our strategic priorities. Our results position us well to deliver another record year in 2014.” SanDisk’s results also dragged down Micron’s (MU) stock, which fell 3.9% to $33.29 Thursday morning.
Microsoft (MSFT) shares jumped 2.9% to $45.34 as the company announced massive layoffs. Microsoft revealed Thursday that it was cutting 18,000 jobs, or 14% of its workforce, over the next year. These cuts are the largest in the company’s 39-year history. More than two-thirds of these cuts, or about 12,500 jobs, will come from the Nokia mobile phone unit, which Microsoft acquired in April. The sources of the remaining 5,500 job cuts were not specified, but CEO Satya Nadella emphasized that the purpose of the cuts was to transform Microsoft into a “leaner” company. “We will simplify the way we work to drive greater accountability, become more agile and move faster,” Nadella wrote in a memo to employees released Thursday. “As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making.” Nadella became CEO five months ago and has repeatedly alluded to making Microsoft a “productivity and platform company,” in contrast to predecessor Steve Ballmer, who focused on “devices and services” in his own company realignment last year.
After signing a multi-year deal with Disney (DIS), Netflix (NFLX) shares were higher Thursday, rising 0.8% to $448.03. Netflix and Disney announced today that the companies had entered into a multiyear licensing agreement that made Netflix the exclusive Canadian subscription television service for first-run Disney movies. The deal will begin with films released theatrically in 2015; they will be available to Netflix subscribers approximately eight months after leaving theaters, faster than on premium TV. The financial terms of the deal were not disclosed. "We are delighted to be the new pay TV home in Canada for the world's highest-quality, most imaginative and entertaining films," said Ted Sarandos, Netflix’s Chief Content Officer, in a statement. "Canadians of all ages will have an incredible range of great stories and characters to look forward to." In 2012, Netflix cut a similar deal for its American subscribers; that deal is effective in 2016, when Disney’s deal with the premium channel Starz expires. The financial terms of that deal were not disclosed either. The agreements with Disney will significantly increase Netflix’s library of children’s programming, which the company believes is crucial to increasing revenues. Netflix also has deals with DreamWorks (DWA) and Mattel (MAT).
IBM (IBM) shares rose 0.9% to $194.06 ahead of its release of second-quarter earnings this afternoon. Analysts surveyed by Thomson Reuters expect IBM to report revenues of $24.13 billion and EPS of $4.29. Analysts predict the company’s total revenue for fiscal year 2014 will be $97.4 billion. The company’s stock received a bump yesterday after IBM and Apple (AAPL) announced a partnership to create business apps and data analytics for iOS. Several analysts commented this week on their expectations for IBM. Cantor Fitzgerald’s Brian White, who has a “buy” rating and $220 price target on the company, wrote that “either IBM needs to begin demonstrating to investors that the company is turning the corner or we believe a ‘shake up’ at the company could occur,” noting that since the end of 2011, IBM’s stock has risen by 2% while the S&P has risen by over 56%. Tien-tsin Huang of JPMorgan (JPM) rated IBM “neutral” at a price target of $197 and expects that the company’s hardware revenue will “decline in mid twenties.” Credit Suisse (CS) analyst Kulbinder Garcha reiterated an “underperform” rating and $160 price target and also expects second quarter 2014 revenues of $24.3billion and EPS of $4.33, above consensus. IBM will report its earnings after the bell today.
--Written by Laura Berman in New York >Contact by Email.
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