Triple whammy eBay news day weighs on the stock…

September 5, 2008

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I hate to interrupt the “FP30+Finding” series that I’m sure has everyone on the edge of their chairs, but there was so much negative eBay news today I need to break in and provide some highlights.  As of this writing the stock is down to $23.25 and seems to have gone below the $24 support level that has been there this year.

Whammy1: Bob Swan @ Citi and GS in NY

First, Bob Swan was a keynote at this weeks Citigroup Investment Research Technology Conference (CIR) on Thursday (replay here) and he also gave a NY lunch Goldman Sachs James Mitchell preso today/Friday (audio and preso are online).

From the CIR, Mahaney published a note that was mixed at best (he summarized the note with a “neutral – uncertainty about eBay’s ability to re-accelerate GMV growth remains our primary concern”)  and I listened to the GS conference here are the highlights:


  • Swan highlighted a challenging 2H08 environment (he re-iterated this at the GS talk).  Here’s the snippet from the Mahaney note:
    • EBAY
      highlighted that macro pressures have slowed eCommerce growth most sharply in
      the US, followed by the U.K. and now more recently in Europe. The primary
      impact on eBay is lower ASPs as consumers shop for lower priced items. While
      the company believes it is benefiting from more value conscious shopping, lower
      ASPs are a headwind to GMV growth.
  • Mahaney asked about the impact of an improving dollar on eBay’s Q3+ results as they have benefited. Swan admitted they will have a negative impact on growth, but suggested that CBT will make up for it.  This is probably correct over a longer term (6-9 months), but with the dollar shooting up against the Euro like it has, I’m not sure how CBT could react that fast?

Neutral: (or could go either way)

  • There’s lots of speculation of layoffs at eBay right now.  At the GS conference, Swan was asked about the employees. He mentioned there are 16k and the rev/employee has gone up but they are always looking at it.
  • Skype – said it is doing well but they are “still evaluating Skype’s fit with eBay” – this could be foreshadowing a sale of Skype which Donahoe told FT earlier in the year is something they would do if it’s not a fit.


  • Even with 2H08 headwinds (see first negative bullet), they are not changing guidance
  • Key initiatives in marketplaces are showing progress – Here’s a snippet from Mahaney:
    • Making
      Progress With Key Initiatives In Marketplaces, Still Some Work To Do – eBay
      highlighted three key areas: 1) Broader, deeper selection of great value, 2)
      Improved product finding and user experience, and 3) Enhance trust and safety.
      While the company felt it had made significant improvements in product
      selection through its various pricing initiatives, and trust and safety, it
      recognized that it needs to do more in finding and user experience.
  • Paypal continues to shine (but not get credit being in the eBay entity) – Swan iterated reasons why they wouldn’t consider spinning it out which could have been seen as negative to those that think this is a possibility.

Whammy 2: Jeetil@DB drops price target (to $19!) and voices Q3 concerns
This am, Jeetil Patel @ Deutsche Bank came out with a note that lowered his already bearish view of eBay.  His top concerns/reasons:

  • His seller checks indicate Q3 is down as much as 15% y/y
  • Fee changes appear to be a net fee increase for sellers
  • US dollar strength creates a triple impact: revenues, profits and tax rate
    • by Jeetil’s calcs this will be a .15-.17 EPS impact in 09 and speculates it could be offset with headcount reductions.

Whammy 3: (this is just getting out there) – CTO Matt Carey is leaving!
Matt started at eBay in 2006 and  I had the pleasure of sharing a beer with Matt at the ecommerce forum and he seemed really excited by the new direction and management changes.  I was shocked to find out today that he has left eBay to go to Home Depot.

This FastCompany (late 07)article goes as far to call Carey Donahoe’s partner in an eBay turnaround and notes that half-way through the Carey interview JD said: “we have to have this guy.”. It was unusual to read about this from a Home Depot press release vs. an eBay press release as they did with the departure of Rajiv.  They are inconsistent on these things and when they don’t announce something major like the CTO leaving, the speculations runs rampant that they are either trying to keep it from being widely known or they weren’t prepared themselves for the change (e.g. Carey let them know today or something).

It all adds up to a tough environment
I’ll leave it to readers to comment and weigh in – is this just an unusually bad news day for eBay, or are things starting to really worsen more than anticipated and executives are jumping ship, layoffs are coming, etc?

SeekingAlpha disclosure: I am long eBay and Google