EBay s Profit Rises Sharply, Aided by Sale of Skype

EBay earnings soared in the critical fourth quarter, fueled by growth in the PayPal business, the sale of Skype and success in luring more people to its shopping Web sites during the holiday season.

EBay, which is based in San Jose, Calif., reported net income in the fourth quarter, which ended Dec. 31, was $1.4 billion, or $1.02 a share, up from $367 million in the same quarter a year ago. The quarter s results include proceeds from the sale of its Skype Internet telephony business resulting in a net gain of $1.4 billion. The company said revenue climbed 16 percent, to $2.4 billion.

We re pleased with the progress and buyers and sellers are noticing, but we still have a lot of work to do, said John J. Donahoe, eBay s chief executive, in an interview.

Analysts said that the fourth quarter was important for eBay because of the holiday shopping season. It marked two years since Mr. Donahoe started as chief executive and laid out a three-year plan to turn around the company s struggling marketplaces business.

John Donahoe is in the early stage of regaining investor confidence and he could not afford to disappoint this quarter, said Sandeep Aggarwal, an analyst at Collins Stewart.

EBay s online payments business continued to drive its growth, while its marketplace business stabilized.

Revenue at the payments business, which consists of PayPal and Bill Me Later, grew 28 percent, to $795.6 million. Twelve thousand software developers signed up to use PayPal on their Web sites and applications after eBay opened its platform to them in November. For the first time, annual revenue from non-eBay sites using PayPal exceeded that from eBay s own sites.

Revenue on eBay s e-commerce sites increased 15 percent, to $1.5 billion. Sixty percent of that revenue came from outside the United States. EBay has been charging lower fees for European merchants to list items on the site.

The total of all transactions except for cars, a metric that eBay calls gross merchandise volume, increased 24 percent, to $14.2 billion, from the same quarter last year. EBay s mobile sites and applications had $600 million of gross merchandise volume.

EBay has been taking steps to improve its e-commerce business. It has ranked top-rated sellers, so buyers can be more confident about trusting them, and has given merchants discounts if they offer free shipping. EBay also started Fashion Vault, a site that sells deeply discounted designer goods for limited times, a model that has been popularized by sites like Gilt. It is trying to improve its search technology so shoppers can more easily find items.

Still, though shoppers are spending more money than ever online, more of them are going to sites other than eBay. Amazon.com, which has long had fewer monthly unique visitors than eBay, had an average six million more in the holidays, according to comScore. Walmart.com and other offline store Web sites are attracting more shoppers.