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The San Jose, California-based company reported GAAP net income of $350 million or $0.27 per share for the third quarter, down 29% from $492 million or $0.38 per share in the prior year quarter.
Excluding items, non-GAAP net income dropped to $502 million or $0.38 per share from $592 million or $0.46 per share in the year-ago quarter. On average, 28 analysts polled by Thomson Reuters expected the company to report earnings of $0.37 per share for the third quarter. Analysts' estimates typically exclude special items.
GAAP operating margin decreased to 19.8% from 24.7% over a year ago. On a non-GAAP basis, operating margin dropped to 28.4% from 31.8% last year. The company attributed the lower operating margins to the recently acquired Bill Me Later, the weaker U.S. dollar, and the company's continuing shift to faster growing, lower margin businesses, partially offset by cost controls.
Third quarter net revenue increased 6% to $2.24 billion from $2.12 billion in the same quarter last year. Twenty-five analysts had a consensus revenue estimate of $2.14 billion for the third quarter.
Revenue from the Payments business unit, which includes online payment service PayPal and short-term credit service Bill Me Later, grew 15% to $688.1 million, driven by continued consumer and merchant adoption of PayPal. Net total payment volume for the quarter was $17.7 billion, an increase of 19% over last year. The payments business continued to increase its penetration on eBay and across e-commerce.
The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other e-commerce sites, posted $1.4 billion in revenue, down 1% over last year. Excluding the impact of the stronger U.S. dollar, revenue growth in the Marketplaces business was 4% year over year.
Gross Merchandising Volume, excluding vehicles, rose 7% to $12.2 billion for the quarter. Online classifieds revenue increased by 20% year-over-year, driven mainly by the acquisition of Den Blå Avis and BilBasen.
Revenue from Internet telephony unit Skype rose by 29% to $185.2 million for the third quarter. Skype has added 40.3 million registered users during the latest quarter and ended the period with more than 520.8 million registered users.
In September, eBay agreed to sell 65% stake in Skype to a group of private equity investors for about $1.9 billion in cash. eBay will continue to retain about 35% stake in Skype. The transaction is expected to close in the fourth quarter of 2009.
eBay believes that Skype will have the focus required to compete effectively in online voice and video communications and accelerate its growth momentum as a separate company. eBay also noted that while retaining an equity stake in Skype, it can focus all efforts and energies on the opportunities in front of PayPal and eBay
U.S. net revenues for the third quarter rose 1% to $1.01 billion, while International net revenues grew 10% to $1.22 billion over a year earlier.
Total operating expenses for the quarter increased to $1.15 billion from $1.03 billion in the prior year quarter.
At the end of the quarter, the e-commerce company had cash and cash equivalents of $2.6 billion.
During the quarter, eBay lost a brand counterfeiting case against LVMH Moet Hennessy Louis Vuitton (LVMUY.PK, MC), a french fashion luxury products maker. The French court also allowed LVMH EUR 80,000 euros in damages from eBay, while warning eBay from continuing any such activities in future. The court said it would enforce a fine of EUR 1,000 per future infringement.
This is the second time eBay is being sued successfully by LVMH over the issue of selling counterfeit goods on the internet.
For the nine-month period of 2009, eBay reported net income of $1.03 billion or $0.80 per share, compared to $1.41 billion or $1.07 per share in the previous year period.
Net revenues for the period declined to $6.36 billion from $6.51 billion in the prior year period.
For the fourth quarter of 2009, eBay anticipates GAAP earnings of $0.28 to $0.30 per share, non-GAAP earnings of $0.38 to $0.40 per share, and net revenue in the range of $2.20 billion to $2.30 billion. Analysts currently project earnings of $0.40 per share on revenue of $2.26 billion for the fourth quarter.
The company noted that the guidance figures assume a mid-quarter close date for the pending sale of Skype and do not reflect the gain on the pending sale of Skype of about $1.0 billion.
eBay closed Wednesday's regular trading session at $25.03, down 3 cents on a volume of 40.16 million shares. In the after-hours, the shares further lost $1.32 or 5.27%.
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