EBay holiday outlook disappoints

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San Francisco: EBay Inc forecast results for the fourth quarter at the low end of Wall Street estimates, disappointing investors who were hoping for a substantial turnaround for the holidays, and its shares down 5 per cent.

But the global e-commerce and payments company's fourth-quarter outlook only included a partial contribution from Skype, the fast-growing Web telephone unit it plans to sell in coming weeks. Analysts said that might have made its fourth-quarter forecast appear lackluster to investors.

Investors had warmed to the idea of a comeback by eBay, which is overhauling its main marketplaces division. Since January, the company's stock had shot up 79 per cent after years of languishing.

But its forecast on Wednesday put a dent in that confidence, even though executives and analysts highlighted improvements such as more fixed price sales, which helped increase volume on eBay.

"The economy we see stable, and we're cautiously optimistic about consumer spending going into the holiday," said Chief Executive John Donahoe. "What is more important from our standpoint is we actually see some progress on our turnaround metrics."

For the fourth quarter, eBay sees adjusted earnings to range between 38 cents to 40 cents per share. Wall Street had been expecting 40 cents per share. It expects fourth-quarter revenues of between $2.2 billion and $2.3 billion. Wall Street's estimate is for $2.57 billion, according to Thomson Reuters I/B/E/S.

However, executives said that if Skype's full contribution were to be factored in, on an apples-to-apples basis, its holiday quarter projection called for revenue growth of 11 to 16 per cent.

From the year-ago revenue figure, that translates roughly into revenue of $2.35 billion to $2.45 billion -- still short of Wall Street's average estimate.

RBC Capital's Stephen Ju estimates Skype yields $200 million of revenue a quarter.

"EBay has a long history of providing very conservative guidance and then breaking it, but people were hoping for evidence of much more recovery," said Bernstein Research's Jeffrey Lindsay.

WAGING A WAR

Skype aside, EBay faces a fierce price war among retailers on- and off-line during the holidays. Wal-Mart Stores Inc pledged on Wednesday "hundreds of millions of dollars" in price cuts each week, pressuring shares in its rivals from Amazon.com Inc to Safeway Inc.

But Donahoe argued the company's decision to focus on the secondary market, with sellers offering out-of-season goods at a discount, would help differentiate it this holiday.