Wednesday, January 21, 2009

eBay Q4 Earnings - First Blush!

I know you are all expecting my typical assessment of eBay's quarterly earnings, but I don't have the heart anymore. I've written this post 4 times already and each time I say "what difference will this make?"

I have been shouting about the troubles at eBay for over 2 years now. I've offered suggestions; I've criticised management and I've banged my head against the wall 100's of times, but nothing has changed. A once great company continues to struggle and now they can't even look further than Q1 of this year to see where they are headed.

It did not have to be this way, but it is.

Amazon will announce earnings next week, on the 29th, and while there numbers will be muted by the failing economy, they will be light years better than eBay's were. John Donahoe and his team are now "on the clock"

If you want details on the numbers please check Auctionbytes and eBayStrategies, they should have plenty of coverage.

Just my 15%

28 comments:

ms.pat said...

I've been reading the financials. Once again Donahoe says they are "right on track" and that the decline was due to the economy. If the board keeps on believing that line then there is little hope for this company. How long do you think they're going to give Donahoe to perform some miracle? The company is starting to look really really stupid...even wall street isn't falling for it anymore. This is just the beginning of the slide - we all know that...All of us except Donahoe?

Anonymous said...

This article also sums it up pretty well:

http://www.pheebay.com/?ebay-changes-now-include-a-big-drop-in-earnings-648.html

I agree wholeheartedly with the opinions in the second half of this. Donahoe has no freaking clue how people use eBay.

Anonymous said...

Once again Donahoe says they are "right on track"

No pat...What he said was "high on crack", but the stenographer made the necessary corrections.

ms.pat said...

hahahahahahaha - you're probably right! :-)

nadine said...

Donahue said, "On eBay, our highest rated sellers, those rated 4A and above, grew their businesses 17% in the fourth quarter, once again demonstrating that sellers who deliver the best deal and a great shopping experience are growing their businesses on eBay."

Could somebody tell me what a "4A rated seller" is? Is this some internal measurement that eBay hasn't made public before? Did I miss the memo? Who are these selected successful eBay sellers?

nadine said...

I notice the margin squeeze showed up - GAAP margins declined from 28% to 22%. Combine a drop in GMV with Diamond Sellers, that's what you get.

Anonymous said...

Randy-
Do you think Ebay will have the audacity to raise their fees and further drive more sellers off?

Or do you think they'll finally get IT and make some positive changes that benefit both buyers and sellers.

From you blog, it sounds like you've given up on Ebay's management, so maybe the answer is, who knows?

Randy Smythe said...

Anonymous,

I don't think they will raise fees, in fact I think they will continue to lower listing fees.

Media fees may go to zero and other FP-30 fees may go lower than 35 cents.

eBay's marketplace biz will no longer be growing so they will need to continue to weed out under-performers.

I also believe they will continue to add more advertising.

Randy Smythe said...

Here is a note from Jeetil Patel of Deutsche Bank.

Mr Patel, says what I've been saying for two years.

While eBay beat 4Q EPS, every other metric at the company came in
weaker than expected. GMV fell 16% Y/Y, revenues fell 7% and
operating profits declined 12% Y/Y. The unwind of the model has
started as top-line declines likely affect profits due to the fixed
costs in the business. With no improvement in business to date,
we think that eBay should move to finally fixing the issues with the
business that have been building for years, including: increasing
demand (via ads?), lowering seller commissions and re-investing in
the buyer interface. While these profit/margin dilutive efforts
clearly present downside to the firm value, the positive is that it
does provide eBay with the ability to salvage the franchise longer
term (which at this point is being destroyed).

Jim S. said...

Randy,

Shouting at eBay is like tilting at windmills. When Wall Street and the shareholders, are tired of JD and his crew only then might there be changes. And who knows if that would be better or worse. In the meantime we all have to keep running our business as is best for ourselves. Whether that's on or off eBay.

As an aside, yesterday my new (since Nov) web site pulled more orders than eBay for the first time.

Randy Smythe said...

Jim S,

Good to hear about the website sales. I'm done "tilting at windmills".

Bob said...

@Nadine,

There are lots of holes in Donahoe's statements. Those 4A sellers (whoever they are, eforcity or buy.com)? who "grew their businesses by 17%"....well, I assume he means they did 17% better with ebay sales.....the question is did they do any better in their own NET profits vs the 17%increase in sales volume.

My own ebay sales volume was stronger this Q4, but due to the ebay/paypal fee stucture, the bump in sales was not meaningful.

The purported 17% increase in sales for these sellers....did it equate to a substantial increase in profits as well....I have my doubts, if they are commodites sellers....

Dave White said...

Nadine,

The 4A you refer to is supposed to be 4.8 and above meaning sellers with DSR's at or above 4.8.

ms.pat said...

"The 4A you refer to is supposed to be 4.8 and above meaning sellers with DSR's at or above 4.8."

LOL my DSR's are 5.0 and 4.98 on my seller dashboard. I can't sell a thing on that site! What IS Donahoe talking about or is he just flapping in the breeze?

Tony P. said...

Hey gang... long time, no rant!

In keeping with a PG rating, I'll just say that the stuff has hit the fan:

http://finance.aol.com/company/ebay-inc/ebay/nas/8-K/09539699/html/sec-filings

That's the equivalent of an emergency meeting in "corporate world" speed. I especially like the cutoff dates being only a few weeks out.

Methinks someone (ie institutional investor) is screaming for a Head or two. Torches and pitchfork time!

(signed) Noise

Randy Smythe said...

Tony,

Are you still wearing your Tin Hat?

Yes it does look curious, especially this:

"Additionally, in accordance with the advance notice provisions set forth in the Company’s Amended and Restated Bylaws, in order for a stockholder proposal to be submitted outside of Rule 14a-8 or a director nomination submitted by a stockholder to be considered timely, it must be received by the Corporate Secretary at the Company’s principal executive office at 2145 Hamilton Avenue, San Jose, CA 95125 no later than February 2, 2009."

That is only one week from Monday so that big Institutional investor better get moving.

Tony P. said...

Randy,

Nope, no tin hat needed. I haven't "seen" any Loch Ness oddities - but - whiffs of swamp gas are appearing.

Looking at the top ownership of ebay shares, a long-time holder's name is now missing. Jeff Skoll was listed at the #2 slot just a month ago.

Now, his name isn't showing as even one of the top ten. As ebay's first President, he had owned about 60M shares (or so, my memory isn't absolute) since forever.

Strange, no?

I'm also wondering if that shareholder's meeting will be held to iron-out some top level mgmt positions that will become vacant between now and THEN.

Maybe JD's head has already been served up and the BOD is desperately trying to contact Randy Smythe to offer the position of CEO. ;-)

David said...

The economy has a lot to do with it.

Microsoft just laid off 5,100 people. Circuit City is out of business and 34,000 people are out of work

The less people that have jobs the less money that's being spent.

I think what eBay should do is cut fees to help out businesses that are struggling.

Anonymous said...

Hey Tony. Long time.

I don't know if there's anything to that stockholder's meeting, but it would make sense they'd replace Donahoe. All year, every time a financial article came out, sellers would make vitriolic comments, sometimes 100s of them, all blaming Donahoe. He was the target for the seller's hatred.

The earning numbers indicate the sellers have made a mass exodus to competitive sites (venues that would not have been created w/o Donahoes disruption plan). It makes sense the BOD would blame him for the numbers coming in so bad, when in fact, they should have been at least been half way decent.

ms.pat said...

Hey Randy - when your ebay's CEO don't forget us small sellers :-)

I read on one tech blog that Ebay will lay off another 1,000 people. Anybody else hear that?

Randy Smythe said...

This change of the Annual Shareholders Meeting doesn't hold up to the smell test completely. I was told that the change of date was because it is normally held around eBay Live and since there is no eBay Live this year they decided to move it.

Poppy Cock, I say. I'm not going to post anything until I get confirmation.

Pat, I haven't heard about another round of layoffs, but who knows.

ms.pat said...

Randy - doesn't pass the smell test. Move it up that much just because there won't be an Ebay Live? I think they're getting kind of desperate. I hope so...else I'll begin to think they're just a bunch of zombies! ;-)

ms.pat said...

I like Jeetil Patel. He's been right all along about Ebay. He knows Donahoe really screwed up the works and he's been stating Ebay has to work with its sellers all the while.

Tony P. said...

Tin hat or no, I have a'hold of a bone that I just can't let go. This missing #2 spot of top ebay shareholder is a bit smelly.

Every so often, for years now, I would look at the shareholder data just to see if anyone was dumping it quick. I was lookin' fer a sign. ;-)

Honestly, I'd have to say it has been a few months since I looked (that I know with absolute certainty), but Jeff Skoll's name was there under Pierre's and above Whitman's. I KNOW it was.

http://finance.aol.com/company/ebay-inc/ebay/nas/institutional-ownership

Just, gone! A little research and I came up with Skoll owning approx. 100M shares of ebay. More research and Forbes confirms he was still #2 as of March 2008:

http://www.forbes.com/lists/2008/10/billionaires08_Jeffrey-Skoll_PB9U.html

A bit more research and not one single bit of info on what may have become of his shares:

http://finance.yahoo.com/q/it?s=EBAY


So there! The beginnings of A Story. Who is the investigative reporter here, just looking for a juicy tidbit? One more bit to help kick it off...

... follow the money!

Randy Smythe said...

Tony,

Skoll's got out when the shares were worth something.

As for something being afoot. I've been asking around and getting conflicting views.

First off there isn't one big investor out there who is going to pull a "Carl Icahn" on eBay.

Other large Institutional Investors are unhappy but not likely to start a coup.

There is no money available (Credit dried up) there for a Private Equity firm to borrow for a run at the company.

Pierre is still the single largest shareholder and if he wants Donahoe to stay then nobody on the board will vote against him.

I'll keep looking.

LegendsOfBatman said...

"I've written this post 4 times already and each time I say, 'what difference will this make?'"

Randy, do not despair. "Never tire from doing good". While this must be frustrating for you, the message is getting out there. While you were ahead of the curve, people are catching up with you. Finally! Do not tire from sharing this. EBay is in trouble, and as you know, and hopefully the rest of the world will soon know, the ebay troubles are NOT due to a poor economy; but rather due to a poor management team, that had been lucky more than good, and now with an even worse management team is paying for it's errors.

Keep up the good work.
Tim
http://forums.delphiforums.com/boycottebay/start
http://myspace.com/boycottebay

Anonymous said...

I agree with L. O. B., this is your day in the sun. Randy this is your time to shine! That last nail? Drive that mother in!!!

Anonymous said...

...and then there's issue that j_donahue has only done 5 ebay trades in his entire and he has 1 positive. The other two positives were cancelled out by negs BEFORE he slapped the no seller neg feedback slant PLUS the consistent issues which wont go away about his "enforced leave" due to "personal issues" whilst at Bain. The guy really is flake and they put him in charge of Ebay...sheesh!