Earnings Preview: EBay to report 1Q results

Online marketplace operator eBay Inc. reports its first-quarter results Wednesday. The following is a summary of key developments and analyst commentary related to the period.

OVERVIEW: During its first quarter, San Jose, Calif.-based eBay continued to weather the global economic downturn and acknowledged that its marketplace business - which it has been struggling to improve - has a way to go. The company also talked up its online payments business, PayPal, and predicted that business will double in size by 2011.

Speaking during a day of analyst briefings in March, Chief Executive John Donahoe and other executives laid out changes to eBay's marketplace business, including focusing more on the market for offseason or liquidation-ready items, refining onsite search capabilities and working even more on cultivating buyers' trust.

EBay also said it expects PayPal, which is its second-largest business, to process between $100 billion and $120 billion in annual payments by 2011. In 2008, the service, which has 70 million active user accounts, processed $60 billion in transactions.

BY THE NUMBERS: In January, eBay forecast first-quarter earnings of 21 cents to 23 cents per share - or 32 cents to 34 cents per share when excluding items. The company also predicted $1.80 billion to $2.05 billion in revenue.

At the time, this was well below what analysts polled by Thomson Reuters were anticipating. Now, however, they expect eBay to report first-quarter adjusted earnings of 33 cents per share on $1.94 billion in revenue.

ANALYST TAKE: In a note to clients, Jefferies & Co. analyst Youssef Squali predicted the company's results will meet "muted expectations" and that management will maintain a cautious outlook for the rest of the year due to weakened consumer demand and eBay's ongoing work to improve its marketplace.

Squali rates eBay shares "Buy" with a $20 price target.

WHAT'S AHEAD: EBay is increasingly trying to focus on its marketplace and payment businesses and shed parts of the business that don't really fit in. This month, the company agreed to pay up to $1.2 billion to buy all outstanding common shares and American Depositary Shares of South Korea's biggest online marketplace, Gmarket.

Just two days earlier, eBay had said it plans to separate Internet communications service Skype from the rest of the company through an initial public offering in 2010. EBay bought Skype for $2.6 billion in 2005, but later wrote down much of its value - essentially an acknowledgment that the company had hugely overvalued it.

STOCK PERFORMANCE: Shares declined 10 percent during the quarter to close at $12.56 on March 31. The stock has since rebounded and traded at $13.94 in afternoon trading Monday, down 45 cents.

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