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Earnings Preview: EBay to report 3Q results

October 17, 2011

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SAN FRANCISCO—EBay Inc. reports its third-quarter results on Wednesday after the market close, giving investors a peek at how the online marketplace and PayPal payment service operator fared during the July-September period. Despite weakness in the economy overall, the company is expected to report growth in both these businesses as consumers continue to shop on and pay online via PayPal.

WHAT TO WATCH FOR: Growth in eBay's marketplaces unit, which includes and other e-commerce sites, and in PayPal, which processes payments on the Web.

San Jose-based eBay has been trying to get more people buying and selling on, improving the site by removing duplicate item listings from search results, showing users when an item is also available locally and offering mobile applications.

The company is also likely to report a boost from GSI Commerce, which operates online retail sites for large companies. EBay bought GSI for $2.4 billion in a deal that was completed in June.

PayPal, meanwhile, has been growing quickly for years. Merchants and consumers use it to buy and sell things on eBay and other sites, both on computers and on mobile devices such as smartphones and tablets. In the second quarter of this year, PayPal reported more than $1 billion in revenue for the first time.

EBay is also likely to update investors on its mobile business. At the end of June, the company said its apps had been downloaded 45 million times since 2008, and the company expects PayPal to process more than $3 billion in mobile payments this year. In 2010, PayPal processed $750 million in mobile payments. EBay is also forecasting that the value of goods sold through its marketplace, including vehicles, will top $4 billion in 2011. That would be double last year's amount.

WHY IT MATTERS: EBay is one of the largest e-commerce companies. The health of its core businesses gives an idea of how online commerce is faring overall.

WHAT'S EXPECTED: Analysts polled by FactSet expect adjusted net income of 48 cents per share on $2.91 billion in revenue for the third quarter.

In July, eBay predicted net income of 37 or 38 cents per share, or 46 or 47 cents per share excluding one-time items, on $2.9 billion to $3.0 billion in revenue.

LAST YEAR'S QUARTER: In the July-September quarter of 2010, eBay earned 33 cents per share -- or 40 cents per share excluding special items -- on $2.2 billion in revenue.