eBay falls on weak forecast, CEO Meg Whitman steps down
Posted by: in Products and ServicesFiled under: Earnings reports, Forecasts, Bad news, From the boards, Press releases, Products and services, Management, Insiders, Consumer experience, Competitive strategy, eBay (EBAY), Amazon.com (AMZN), Marketing and advertising
Shares of e-commerce giant eBay Inc. (NASDAQ: EBAY) are trading around 7% lower in after hours trading this day following its fourth quarter earnings release shortly after the market close.
As we looked at in our earnings preview, the company has been struggling to keep up with the competition in its auction business. Two key components that have hurt eBay’s auction business are (1) raising fees that have left some of the company’s long term users looking for other venues to do their business, and (2) massive number of fraudulent items on the site.
The company announced that its fourth quarter numbers were actually superior than Wall Street had expected, with earnings per share of 45 cents per share, easily topping the 41 cents that analysts had been anticipating to see.
So why is the stock down in after hours trading? Looking ahead the company forecast earnings below what the market had been expecting to see. The company announced that it now is looking to see between 37 and 39 cents for its first quarter, below the 40 cents that Wall Street was hoping to hear.
One of the biggest pieces of news regarding eBay was the announcement that the company’s CEO, Meg Whitman, would be stepping down from her post at the end of March. Taking over for her will be John Donahoe who is currently running the company’s on the web auction business.
eBay users over the past few years have definitely had a love/hate relationship with Whitman, and it will be interesting to see just how well liked her successor finds himself. From a users perspective, eBay users are going to be looking for one main thing… lower fees. Don’t be surprised to see fees coming down once Donahoe takes control.
From a shareholder point of view we should probably anticipate to see the new CEO come with the main goal of reducing overall costs. While expecting to see overall cost reductions, marketing and advertising should be an area where investments are made. The company is in fierce competition with Amazon.com, Inc. (NASDAQ: AMZN) and it needs drastic measures to fend off its most powerful on the internet rival.
Lower fees, heavier advertising… what other suggestions would you have for Donahoe as he prepares to take over the reigns in a little under 10 weeks from now? Let us know what changes you would like to see. Whether you’re a eBay user, or an eBay investor… what changes would you love to see at eBay?
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the web investment advisory service Investor’s Observer
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