PayPal Posts a Profit

The online payment system trods in territory many dot-coms can only dream about.
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Online payment system

PayPal

(PYPL) - Get Report

did in its first quarter as a public company what scores of Internet firms never did: It turned a profit.

Wednesday afternoon, the company reported first-quarter earnings of $1.2 million, or 2 cents a share, using generally accepted accounting principles, or GAAP, compared with a net loss of $29.3 million a year ago. Excluding certain items, PayPal earned 7 cents a share, compared with a consensus estimate of 4 cents a share, according to Thomson Financial/First Call. It reported revenue of $48.8 million, also topping Wall Street's expectations of $46.3 million.

PayPal, based in Palo Alto, Calif., also gave bullish guidance. The company said it expects revenue of between $52 million and $53 million in the second quarter, and earnings, excluding certain items, of 7 cents to 8 cents a share. Analysts had pegged second-quarter earnings at 6 cents per share.

PayPal went public in February and soared 55% on the day of its debut. Shares later tanked on worries that online auctioneer

eBay

(EBAY) - Get Report

would ratchet up the competition with its own payment system, eBay payments.

But those worries largely dissipated as analysts scrutinized the numbers and found PayPal growing faster than eBay Payments, and shares have soared recently, partly on a rumor that circulated earlier this week that eBay could buy out Pay Pal.

In a postclose conference call, PayPal CEO Peter Thiel acknowledged there are "synergies" between PayPal and eBay, but he wouldn't confirm that any negotiations have taken place. However, observers say that anything beyond a flat "no comment" could indicate that at the very least some preliminary discussions have occurred.

Anticipating good news on the earnings front, investors bid up shares in PayPal Wednesday $1.49, or 6.2%, to $25.38.