Shares of e-commerce giant eBay Inc. (NASDAQ: EBAY) are trading around 7% lower in after hours trading today following its fourth quarter earnings release shortly after the market close.As I looked at in my earnings preview, the company has been struggling to keep up with the competition in its auction business. Two key components that have hurt eBay's auction business are (1) raising fees that have left some of the company's long term users looking for other venues to do their business, and (2) large number of fraudulent items on the site.
The company announced that its fourth quarter numbers were actually better than Wall Street had expected, with earnings per share of 45 cents per share, easily topping the 41 cents that analysts had been expecting to see.
So why is the stock down in after hours trading? Looking ahead the company forecast earnings below what the market had been expecting to see. The company announced that it now is looking to see between 37 and 39 cents for its first quarter, below the 40 cents that Wall Street was hoping to hear.
One of the biggest pieces of news regarding eBay was the announcement that the company's CEO, Meg Whitman, would be stepping down from her post at the end of March. Taking over for her will be John Donahoe who is currently running the company's online auction business.
eBay users over the past few years have definitely had a love/hate relationship with Whitman, and it will be interesting to see just how well liked her successor finds himself. From a users perspective, eBay users are going to be looking for one main thing... lower fees. Don't be surprised to see fees coming down once Donahoe takes control.
From a shareholder point of view we should probably expect to see the new CEO come with the main goal of reducing overall costs. While expecting to see overall cost reductions, marketing and advertising should be an area where investments are made. The company is in fierce competition with Amazon.com, Inc. (NASDAQ: AMZN) and it needs drastic measures to fend off its most powerful online rival.
Lower fees, heavier advertising... what other suggestions would you have for Donahoe as he prepares to take over the reigns in a little under 10 weeks from now? Let us know what changes you would like to see. Whether you are a eBay user, or an eBay investor... what changes would you love to see at eBay?
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer
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Reader Comments (Page 1 of 1)
1-23-2008 @ 8:12PM
Mozelle said...
First of all I want to say that Meg Whittman being booted out the door is the best thing eBay has done in years!
Maybe too late for this company to make a comeback though.
Second...I'm not sure that Dennis the menace is the right person for the job.
I think they should bring in fresh blood.
A complete blood transfusion is needed at eBay.
As a stock holder I am totally disgusted when Meg states that she does not pay attention to stock prices. She should, she owes it to her stockholders!
She sold a bundle at $40.00 dollars a share knowing the stock was going to tank! lol.
Only glad I didn't buy at that price. lol
She has taken this once great company down to nothing! All eBay has now is a bad reputation!
That's quite an accomplishment on it's own if you ask me.
Word of mouth will ultimately burn and crash this company for good if they do not change their ways and soon!
Their feedback system is seriously flawed.
Anyone can retaliate a negative feedback with a negative feedback. A negative feedback from the buyer or seller(non paying or shoddy merchandise) should be allowed a RESPOND only by the seller or buyer...and not a negative in retaliation!
Listing fees are way to high....with picture gallary alone costing 35 cents.
When an item is listed, a picture showing the item should be included in the listing price. Buyers want to see the item listed. A seller should not have to pay extra for that feature! Without buyers on the site you have nothing! No sellers...no buyers.
Fixing those two problems will improve eBay in the long run.
I think Amazon.com is ahead of the curve.
Meg Whittman blew it big time!
Just because eBay makes the headlines everyday does not mean it's a great stock!
Quite frankly I don't see this stock going anywhere unless they start paying dividens to aquire new buyers. Just my opinion of course!
1-23-2008 @ 10:43PM
Bill said...
It is time for EBay to take a dive and get rid of a lot of their deadbeats, the only caqre they had is collecting fees for ads. people could place Bogus bids and not forced to honor the bid. I sold a $16,000 item and never collected because Ebay would not enforce their $15,000 and over verification Rule. So I am glad to see this nothing company get what it deserves. Good Bye