Yawn. There's almost always something interesting about an
conference call -- a new strategy, a unique window on the Internet world and a technology snafu that leaves management squirming.
Not this time. eBay, which reported better-than-expected earnings Tuesday evening, officially has become boring. And, in this market, that seems to sit well with investors, who bid up eBay's shares 8% to 153 9/16 before the San Jose, Calif.-based auctioneer released its results and then added nearly another 9 points to the stock in after-hours trading. Still, at Tuesday's close, the stock remains 40% below its March 27 high of 255.
eBay maintains a hint of profitability ("consolidated net income excluding the effects of certain noncash and stock-related charges" of $8 million, or 6 cents per share, compared with the 3 cents analysts had guesstimated), adds customers efficiently ($13 of marketing for each new customer) and continues to boost forecasts for 2000 revenues (this time by $20 million to $410 million).
Oh, and eBay will split its stock 2-for-1 on May 24 for shareholders of record May 9. That's the company's second split, the first was a 3-for-1 affair in March 1999.
"eBay has been an execution machine," states Margaret Whitman, eBay's CEO. A little immodesty apparently is an acceptable side-effect for delivering the goods.
Because year-over-year revenue growth of 100% to $85.8 million was so strong, eBay investors are sure to overlook the now predictable second phase of the one-two punch the company presents with its increased revenue forecasts: None of the $20 million will show up in the bottom line, says Chief Financial Officer Gary Bengier. All of the extra revenue will be reinvested in eBay's growing businesses, including its
bill-payment service (now partly owned by
) international operations and the 53 regional auction sites in the U.S. So analysts shouldn't raise their forecasts of 36 cents per share of earnings this year.
This call was a snoozer by eBay standards, but the company still knows how to tell a good yarn. Whitman illustrated the power of regional auctions -- which are designed to peddle difficult-to-deliver items -- with the story of a young couple that bought a Steinway baby grand piano for $10,200 on the East Coast. A dealer originally had offered the seller $7,000, she says, and of the 32 bidders for the piano, 10 came to see it in person. The purchasers turned out to live two blocks from the seller.
Quips Whitman: "Delivery should be fairly easy."
And this anecdote should make it even easier for local newspapers who rely on high-gross-margin classified advertising to understand why they should be quaking in their boots at the prospects of eBay hawking pianos in the neighborhood.
Another example of the comforting ennui from eBay is its gross profit margins of 73%, up from 71% in the fourth quarter of 1999. And analysts who follow eBay have lapsed back into their sycophancy of the company's early days as a public company -- late 1998. One after another they delivered "congratulations" to management. And why not: This is one dot-com they don't have to apologize to their clients about.
Still, eBay remains a start-up whose business model is still in development. Even now, eBay derives less than $1 million of its earnings from operations. The bulk of its earnings are from "interest and other" income. And management used the phrase "too early to tell" to describe the prognosis for its small-businesses auction area. Nor could it say anything definitive about acceptance of Billpoint, a new payment system, or predict when all those rivals with "potentially unsustainable business models" will fall by the wayside and give eBay a chance to crank up its profit machine.
Meantime, the embarrassing site outages are a thing of the past -- for now. And eBay is on a path to conduct $4.6 billion of commerce -- that's known as gross merchandise sales, not revenue -- on its site this year.
Ho hum. Remember: Boring is good.
Adam Lashinsky's column appears Tuesdays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at