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EBay's Magic Has Faded But May Be Back

By Leslie Walker
Thursday, April 21, 2005; Page E01

EBay Inc., the Internet juggernaut, seems to have lost its mojo, that special swagger that made it a rocket on Wall Street for six hot years.

The company yesterday announced solid financial results for the first quarter, with revenue totaling $1.03 billion, up 36 percent over the same period last year. Profit was $256.3 million, up 28 percent.

_____Web Q&A_____
Transcript: .com's Leslie Walker hosted a live Web chat with Udi Manber, CEO of Amazon's A9.com search engine. They discussed the future of Web search.
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Not bad for the average company, but eBay has never been your typical critter. In years past, its quarterly revenue grew by 50 to 90 percent and averaged 70 percent growth a year since the company went public in 1998. Yesterday marked the second quarter in a row in which eBay announced revenue growth considerably below 50 percent.

So far, 2005 has not been kind to the Web auctioneer. Its shares tumbled after the company made two announcements in January -- that profit growth had slowed in the last quarter of 2004 and that it was boosting selling fees in the United States. After peaking at $59.21 in December, eBay shares dropped to $31.58 before closing yesterday at $33.11.

The fee hike sparked a mini-revolt among eBay dealers in February, with thousands signing petitions of protest and many threatening to leave for rival sites. Some analysts worried that eBay's core business -- charging commissions to connect buyers and sellers -- could face strong competition if sellers bypassed eBay to market their own Web sites directly to buyers.

Also worrisome were disclosures that eBay chief executive Margaret Whitman had interviewed for the chief executive's job at Walt Disney Co. before withdrawing her name from consideration.

Yesterday, Whitman sought to reassure anyone who thought she might be preparing to abandon a leaky ship. "I am personally committed to being a part of eBay's journey for many more years to come," she said in a conference call with analysts.

Whitman acknowledged eBay's revenue growth had slowed considerably in the United States, where it was only 19 percent in the first quarter, but she said international revenue was still growing at rates above 51 percent. Moreover, there were more users outside the United States than inside for the first time, she said.

Whitman said eBay was doing a lot to add new features and promote growth in the United States, such as a new "best price offer" that lets buyers haggle with sellers offering items at fixed prices. She also said PayPal, the electronic payment system owned by eBay, is expanding beyond auctions to process payments for big businesses, such as Apple Computer Inc.'s iTunes store.

"These are remarkable results by anyone's standard," Whitman declared. "EBay and PayPal are the best e-commerce franchises in the world."


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