EBay Announces Aggressive Buyback

A car drives by the offices of eBay and PayPal in San Jose, Calif., Wednesday, Jan. 24, 2007. EBay Inc. is expected to post fourth-quarter earnings after the bell. (AP Photo/Paul Sakuma) (Paul Sakuma - AP)

Analysts said the strong quarterly results, buyback and increased guidance were the strongest signals yet that eBay could be poised for an upswing.

"I thought they were in a bit of trouble but it looks like they pulled it out. Meg did the hard spade work and pulled it all back together again," said Roger L. Kay, founder and president of research firm Endpoint Technologies. "I'd say eBay has bought itself at least a couple of years here in which they can think about how the enemies are sneaking around the back wall while they're minding the business."

In 2006, eBay earned $1.13 billion, or 79 cents per share, up 4 percent from $1.08 billion, or 78 cents per share, in 2005. Excluding stock-based compensation costs and other expenses, eBay in 2006 earned $1.49 billion, or $1.05 per share, up nearly 24 percent from $1.2 billion, or 86 cents per share, a year earlier.

Annual revenue was $5.97 billion, up 31 percent from $4.55 billion in 2005. That's higher than the $5.96 billion from the most optimistic analysts polled by Thomson Financial. Overall, analysts expected eBay to earn $1.46 billion, or $1.02 per share, on sales of $5.91 billion.

Despite the rosy quarter, fraud is mounting, and executives say combatting scams has become the top priority for 2007. An internal survey showed scammers may be denting eBay's reputation, and earlier this month, eBay's largest 250 sellers expressed concern during closed-door meetings with executives about the growing number of scams.

Less than one-hundredth of one percent of the listings on eBay are fraudulent. But even by that measure, as many as 61,000 auctions may have been phony last quarter, when more than 610.2 million items were listed.

EBay began a program last year to safeguard members' identities by concealing their user names on expensive listings. That measure could make it harder for con artists to contact losing bidders and goad them into "second chance offers," where customers wire cash to scammers' accounts.

Executives are working with international trade groups and the FBI to combat cyber criminals from organized syndicates. Engineers are trying to reduce counterfeit items and "phishing" scams, where con artists send e-mails nearly identical to official eBay announcements _ but redirect them to a site where passwords and financial data are mined.

"I got a very persuasive e-mail about my Bank of America account just last night, and if I wasn't in this industry I'm not sure I could have figure out it wasn't from Bank of America," Whitman said. "Trust and security must be part of our core competency, and we've got to stay a step ahead _ more than a step ahead."