eBay Spinning Off – Yet Again

According to a recent comScore report, the total online retail spending for the November–December period in 2014 was estimated to grow 16% to $61 billion. The researcher expected sales through mobile devices to see higher growth rates. Desktop generated e-tail sales were projected to grow 14% to $53.2 billion and mobile commerce was expected to grow 25% to $7.9 billion. According to the ChannelAdvisor Same Store Sales (SSS) report, during the November-December period, holiday sales did report the expected 16% growth.

eBay’s Financials

eBay’s (Nasdaq: EBAY) fourth quarter revenues grew 9% over the year to $4.92 billion, marginally shy of the market’s projections of $4.93 billion. EPS of $0.90 was ahead of the Street’s estimated $0.89 for the quarter.

Revenue growth was driven by PayPal, which saw revenues grow 24% to $2.2. billion. During the quarter, PayPal added 4.6 million new active registered accounts taking the total to 162 million. eBay Marketplaces gross merchandise volume improved 2% overall. Revenues from the segment improved to $2.3 billion as they added 2.9 million new buyers to reach 155 million. The eBay Enterprise segment saw gross merchandise sales improve 9% to $443 million.

For the current quarter, eBay projected revenues of $4.35 billion-$4.45 billion with an EPS of $0.68-$0.71. The market had forecast revenues of $4.7 billion with an EPS of $0.76 for the quarter. eBay expects to end the year with revenues of $18.6 billion-$19.1 billion with an EPS of $3.05-$3.15. The market was looking for the year’s revenues at $19.98 billion and EPS of $3.26.

eBay’s Worries

During the quarter, eBay also announced plans to lay off 2,400 employees – nearly 7% of their headcount to manage costs better. The move may have been triggered by the lackluster holiday sales for eBay. The ChannelAdvisor Same Store Sales (SSS) report saw Amazon’s sales grow 27% during the November-December period, compared with eBay’s modest 7% growth.

eBay attributed some of the loss of this volume to traffic being impacted by decline in new users due to SEO changes and the trouble that occasional buyers faced when returning to their site because the site wanted the password reset when they logged in.

Last year, they had announced the spin-off of PayPal and are now evaluating strategic options for exiting their Enterprise segment. They have not narrowed down on an option, but initial discussions suggest that they may either sell it or go for an IPO for eBay Enterprise. eBay Enterprise helps retailers manage their e-commerce offerings. They offer their retail customers services such as access to a scalable e-commerce platform along with options of order fulfillment, freight, customer service and digital marketing capabilities. The Enterprise segment includes customer names such as Aeropostale, Timberland, ToysRUs, ESPN, Sony and Godiva to name a few. During the last quarter, GMV of goods sole through eBay enterprise grew to $1.9 billion. eBay has realized that while the business has potential, it has limited synergies with their business and a separation of the entity will allow the split organizations to focus on their core markets.

Meanwhile, the PayPal spin off is expected to be complete by this year when both companies will become publicly traded companies.

eBay’s stock is trading at $56.01 with a market capitalization of $68.89 billion. It touched a 52-week high of $59.70 in February last year.