In a sign of the ecommerce sector's resurgence -- and the recovery of one of its leading marketplaces -- eBay (NASDAQ: EBAY) posted solid first-quarter earnings, edging out Wall Street forecasts and topping its financial performance from a year earlier.
Thanks to the strong performance of its payments division, the ecommerce giant posted an 11 percent profit over last year, reporting net income of $398 million in the first quarter, up from $357 million a year ago.
Excluding one-time charges, eBay reported net income of $554 million on earnings of $0.42 per share for the first quarter, a penny ahead of analysts' expectations and up from $0.39 cents per share in the first quarter of last year. Revenue came in at $2.2 billion, just edging out the Street's consensus estimate of $2.18 billion, and up 9 percent from a year ago.
"Our first quarter results reflect another strong step toward achieving our three-year growth and profitability goals," eBay President and CEO John Donahoe said in a statement. "We are becoming a more customer-focused and technology-driven company, delivering more innovative products and experiences and driving operating efficiencies to reinvest in growth. We are improving the fundamentals of our business, strengthening eBay Marketplaces and aggressively growing PayPal to become the leader in global online payments."
In many ways, those fundamentals represent a key indicator of the state of the online economy -- one chief reason why they're so closely watched. eBay's marketplaces unit serves as a key trading hub and inventory clearing house for online merchants, for instance, while its PayPal online currency is a force to be reckoned with in online payments.
Both groups saw sizable bumps in revenue during the quarter. eBay's payments division, dominated by PayPal, accounted for 37 percent of the company's revenue in the first quarter, raking in $809.3 million, up 26 percent from last year.
The company's core marketplaces unit, which includes the main eBay.com site, Shopping.com and other ecommerce hubs, brought in $1.4 billion in revenue, a 13 percent year-over-year increase.
The results also help solidify eBay's solid performance in the holiday quarter, when it saw its earnings jump 16 percent from the year-earlier period.
Donahoe has been shepherding eBay through a turnaround during his two years at the helm of the company.
The numerous initiatives and policy changes the company has undertaken under his stewardship include several changes to the listings and feedback policies aimed at improving the shopping experience for buyers, changes that have often met with strenuous objections from sellers.
That turnaround strategy has aimed to transform eBay into a more "customer-focused company," Donahoe told analysts on a conference call discussing the company's earnings. Another pillar of his vision for the turnaround is to ramp up eBay's technology platform and nurture a spirit of innovation throughout the company.
"We've made good strides in our technology and innovation, and we're just getting started," Donahoe said.
Donahoe has also been working to move the marketplace toward fixed-price listings, discouraging the auction model that has largely defined the company since its inception.
Most recently, eBay has been making aggressive strides in the mobile and social industries. The company has launched several shopping and payment apps for the iPhone, BlackBerry and Android devices, and has partnered with social sites like Facebook to broaden its reach, both domestically and internationally.
eBay has been actively pursuing payments partnerships with overseas vendors, including a deal with China UnionPay, which Donahoe boasted will soon add 1.3 billion Chinese consumers to PayPal's potential market.
While the company continues to press ahead with its turnaround strategy for the marketplaces division, Donahoe looks for the steepest growth in the payments sector, particularly as other firms begin to roll out mobile ecommerce applications. But eBay feels like it's ahead of the curve, noting that within three weeks of launching the PayPal iPhone app last month, it registered more than 1 million downloads.
"You're going to see lots of announcements around online payments and mobile payments in the coming months," Donahoe said. "We continuously and closely monitor the competitive landscape, and feel confident about our position and our competitive advantages."
Kenneth Corbin is an associate editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.
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