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Company News: Skype brings major loss for eBay

Thu., Oct. 18, 2007

EBay Inc. reported Wednesday a third-quarter net loss of more than $936 million – a rare plunge into the red for the e-commerce juggernaut caused by charges to its Skype telecommunications division.

But San Jose, Calif.-based eBay still easily exceeded Wall Street’s expectations for the quarter ended Sept. 30, thanks to record revenue of $1.89 billion, up 30 percent from the year-ago quarter.

Executives credited record revenue at the PayPal electronic payment division, and brisk sales outside of the United States and at ticket broker StubHub.com.

Early this month, eBay announced it would take a $900 million write-down in the value of Skype. That impairment charge essentially acknowledged that eBay executives drastically overvalued the $2.6 billion Skype acquisition, completed in October 2005.

Including the Skype charges, eBay lost $936.6 million, or 69 cents per share. In the year-ago quarter, it earned $280.9 million, or 20 cents per share.

It was the first time the company reported a loss since the second quarter of 1999, eBay President and CEO Meg Whitman said. It’s also the first time the company has taken a write-down.

Not counting Skype charges, stock-based compensation and other expenses, eBay earned $563.8 million, or 41 cents per share, up 53 percent from $367.4 million, or 26 cents per share, in the year-ago quarter.

Despite losses from souring home loans and tough-to-sell corporate debt, JPMorgan Chase & Co. managed to beat Wall Street’s expectations and eke out a 2 percent profit rise in the third quarter.

The bank reported a profit despite marking down $1.3 billion on leveraged loans; $339 million in debt obligations backed by collateral, including subprime mortgages; and $186 million in mortgages it has issued and that are in the pipeline. It also padded its provisions – essentially, its emergency fund for loan losses – by about $2 billion.

JPMorgan did much better than Citigroup Inc., where profit fell 57 percent after the nation’s largest financial institution wrote down nearly $3 billion in mortgage-related and highly leveraged corporate debt, plus an additional $636 million in fixed-income trading losses.


 

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