SAN JOSE, Calif. -- EBay Inc., a perennial investor darling that defied the dot-com collapse, is warning Wall Street that its 2005 financial performance will fall short of bullish expectations.
The company's revised profit and revenue forecasts provoked a swift market sell-off and unleashed a torrent of investor skepticism aimed at a variety of issues, including the company's China strategy and its skill at managing currency fluctuations.
EBay revised down its 2005 sales forecast to between $4.25 billion and $4.35 billion, below analysts' expectations.
(Paul Sakuma -- AP)
EBay shares plunged $19.72, or more than 19 percent, to close at $83.33 in Thursday trading on the Nasdaq Stock Market, lopping more than $12.4 billion from the company's market capitalization.
Ebay shares are off more than 20 percent this month.
Margaret C. Whitman, eBay's president and chief executive, said Wednesday that the company expects to report 2005 sales between $4.25 billion and $4.35 billion, including $1.01 billion to $1.03 billion in the first quarter.
That's below the lofty expectations of Wall Street, where a survey of 22 analysts by financial research firm Thomson First Call predicted eBay would report 2005 sales of roughly $4.37 billion, including $1.05 billion in the first quarter. The most optimistic analysts predicted 2005 revenue of $4.52 billion, including $1.07 billion in the first quarter.
"The bloom is off the eBay rose," said David Garrity, a technology analyst for Caris & Co. "You're going to have the entire Street cutting numbers just to come in line with what the company published."
EBay, one of the world's largest e-commerce companies, also came in one penny under Wall Street's expectations for the fourth quarter, with a profit of $205.4 million, or 30 cents a share. That compares with $142.5 million (21 cents) in the same period of 2003.
Excluding special items, eBay earned $226 million (33 cents), up from $157 million (24 cents) in the fourth quarter of 2003.
EBay, considered one of the most financially conservative companies in Silicon Valley, has met or exceeded Wall Street expectations every quarter but one since 2001, when Thomson First Call began tracking the company's performance.
Analysts sounded alerts on a variety of eBay data. Many questioned why the company would spend an estimated $100 million to develop its Chinese operations, though China isn't likely to become a mainstream e-commerce market for years. Others worried about the rising amount of money eBay spends on litigation, administrative costs and other expenses.
In a research note Wednesday, Derek Brown of Pacific Growth Equities LLC warned that the company's earnings may have been inflated by as much as $140 million in 2004 because of the weak U.S. dollar, which may not be sustainable in 2005 and beyond.
"We believe a more cautious approach to the stock is warranted at this time," Brown wrote.
EBay had 135 million registered users in 2004 -- enough to make it the world's ninth-largest country. More than 1.4 billion items were listed on the site last year -- the equivalent of five items for every American.
EBay also announced a two-for-one stock split effective Feb. 16 for shareholders of record on Jan. 31.