SAN JOSE, Calif.--(BUSINESS WIRE)--eBay Inc. (Nasdaq:EBAY) (www.ebay.com) today reported financial results for its fourth quarter and year ended December 31, 2007. The ecommerce company posted fourth quarter revenue of $2.18 billion, representing a $461 million year-over-year increase. Revenue grew across all businesses highlighted by more robust growth from PayPal, StubHub, Skype, classifieds and advertising. The company recorded net income on a GAAP basis of $531 million or $0.39 per diluted share, and non-GAAP net income of $611 million or $0.45 per diluted share.

For the full year, eBay Inc. posted $7.67 billion in revenue, net income on a GAAP basis of $348 million or $0.25 per diluted share, and non-GAAP net income of $2.11 billion or $1.53 per diluted share.

GAAP operating margin increased to 28.7% for the quarter, compared to 26.2% for the same period last year. Non-GAAP operating margin increased to 34.6% for the quarter, from 33.4% for the same period last year. For the full year GAAP operating margin came in at 8.0%, with non-GAAP operating margin at 33.1%.

eBay Inc. generated $793 million of operating cash flow and $665 million of free cash flow during the fourth quarter. The company’s full year operating cash flow was $2.64 billion and free cash flow was $2.19 billion.

“We’re very pleased with the results for the quarter which were strengthened by a solid holiday shopping season,” said eBay Inc. President and CEO, Meg Whitman. “We had a remarkably strong year from a financial perspective. We enter 2008 with our most diverse portfolio of ecommerce offerings ever

positioning us to drive long-term growth in the global ecommerce market.”

Quarterly Business Highlights

The company purchased approximately 9.2 million shares of its common stock at a cost of approximately $312 million (For the full year, the company repurchased 44.6 million shares of its common stock for approximately $1.5 billion). eBay announced a cross border trade agreement with Yahoo! Japan to provide Japanese consumers with access to eBay.com through the site Seikamon.com. eBay completed the acquisition of Afterbuy to extend service and support for professional sellers in Germany. StubHub completed its 10 millionth ticket sale and announced a promotional agreement with ESPN to make StubHub the exclusive tickets provider on ESPN.com. PayPal signed top merchant service account deals with U.S. Airways, AirTran, drugstore.com and Shop NBC among others. PayPal hired four seasoned executives with deep consumer, technology and international experience to help drive the company’s ongoing expansion. Skype announced a partnership with MySpace enabling voice communications for more than 110 million MySpace users. Skype launched the 3 Skypephone in eight countries including the United Kingdom, Italy and Australia to enable users to make Skype-to-Skype calls and chats on mobile phones. “Our fourth quarter results capped off a great year for eBay, with strong top-line growth, stronger bottom-line growth, and excellent free cash flows,” said Bob Swan, eBay Inc. CFO. “We closed the year with a very strong balance sheet, giving us the financial flexibility to invest across all of our business units in order to extend our leadership positions.”

Financial Highlights (presented in millions, except per share data)

Fourth Quarter

1. 2006 Change

Net revenue $2,181 $1,720 $461 27% GAAP Net income $531 $346 $185 53% Earnings per share (diluted) $0.39 $0.25 $0.14 57% Non-GAAP Net income $611 $431 $180 42% Earnings per share (diluted) $0.45 $0.31 $0.14 45% Full Year

1. 2006 Change

Net revenue $7,672 $5,970 $1,702 29% GAAP Net income $348a $1,126 ($778) (69%) Earnings per share (diluted) $0.25a $0.79 ($0.54) (68%) Non-GAAP Net income $2,106 $1,492 $614 41% Earnings per share (diluted) $1.53 $1.05 $0.48 46%

(a) Includes previously reported goodwill impairment charge of $1.39 billion recorded in the third quarter of 2007, which was not deductible for tax purposes.

Quarterly Business Unit Discussion

Marketplaces

The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, had a strong quarter with a record $1.50 billion in revenue, equating to 21% year-over-year growth. Revenue growth was driven by StubHub, advertising, the fixed price format on eBay and, in part, by the benefit of a weaker U.S. dollar. Based on average monthly unique visits, eBay was the number one ecommerce site in the U.S., UK and Germany during the 2007 holiday shopping season, according to Nielsen Online. Approximately 54% of Marketplaces revenue came from markets outside the U.S. Gross merchandise volume was $16.21 billion for the quarter, an increase of 12% over the fourth quarter of 2006. eBay continues to focus on buyer and seller initiatives to accelerate gross merchandise volume in the U.S., Germany and the United Kingdom.

Payments

PayPal posted another stellar quarter with $563 million in revenue, an increase of 35% year-over-year. Net total payment volume (TPV) for the quarter was $14.04 billion, an increase of 35% year-over-year. The revenue and net TPV growth represents increased penetration on eBay as well as expanded adoption of PayPal Merchant Services across the Web. PayPal will continue to focus on greater penetration into the Marketplaces business as well as the acquisition of new merchants.

Communications

Skype contributed $115 million in revenue, representing 76% year-over-year growth, and posted a fourth consecutive quarter of segment profitability. Skype attracted new users at a rapid pace through the quarter and ended the period with more than 276 million registered users around the world.

Selected Financial Results

Taxes — The GAAP effective tax rate for the quarter was 21%, compared to 28% for the fourth quarter of 2006. The non-GAAP effective tax rate for the quarter was 24% compared to 29% for the fourth quarter of 2006. The GAAP effective tax rate for 2007 was 54% while the full year non-GAAP tax rate came in at 21%. Cash, cash equivalents and investments — The company’s cash, cash equivalents and investments totaled $5.04 billion at December 31, 2007 compared to $3.50 billion at December 31, 2006. Business Outlook

Full year 2008 – eBay expects net revenues in the range of $8.500 to $8.750 billion with GAAP earnings per diluted share in the range of $1.27 to $1.31 and non-GAAP earnings per diluted share in the range of $1.63 to $1.67. First quarter 2008 – eBay expects net revenues in the range of $2.000 to $2.050 billion with GAAP earnings per diluted share in the range of $0.28 to $0.30 and non-GAAP earnings per diluted share in the range of $0.37 to $0.39. Other Updates

In a separate press release, the company also announced today changes to its management team, including the retirement of current President and CEO Meg Whitman and the naming of John Donahoe as her successor as of March 31, 2008. The company's board of directors has approved another stock repurchase program for $2 billion. The new program gives the company the ability to repurchase up to $2.85 billion of its common stock under its combined repurchase programs. Quarterly Conference Call

eBay will host a conference call to discuss fourth quarter results at 2:00 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, can be accessed through the company’s Investor Relations web site at http://investor.ebay.com. In addition, an archive of the webcast will be accessible through the same link.

About eBay Inc.

Founded in 1995, eBay Inc. connects hundreds of millions of people around the world every day, empowering them to explore new opportunities and innovate together. eBay Inc. does this by providing the Internet platforms of choice for global commerce, payments and communications. Since its inception, eBay Inc. has expanded to include some of the strongest brands in the world, including eBay, PayPal, Skype, Shopping.com, and others. eBay Inc. is headquartered in San Jose, California.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as “non-GAAP financial measures” by the Securities and Exchange Commission (SEC): non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate, and free cash flow. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. For a reconciliation of other non-GAAP financial measures to the nearest comparable GAAP measures, see “Non-GAAP Measures of Financial Performance,” “Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin,” “Reconciliation of GAAP Net Income to Non-GAAP Net Income,” “Reconciliation of GAAP to Non-GAAP Effective Tax Rate,” “Reconciliation of Operating Cash Flows to Free Cash Flow” and “Business Outlook” included in this press release.

Forward-Looking Statements

This press release contains forward-looking statements relating to the future performance of eBay and its consolidated subsidiaries that are based on our current expectations, forecasts and assumptions and involve risks and uncertainties. The company’s actual results could differ materially from those predicted and reported results should not be considered as an indication of future performance. Factors that could cause or contribute to such differences include, but are not limited to: the company’s need to increasingly achieve growth from its existing users in its more established markets; the company’s ability to deal with the increasingly competitive ecommerce environment, including competition for its sellers from other trading sites and other means of selling, and competition for its buyers from other merchants, online and offline; the need to manage an increasingly large enterprise with a broad range of businesses of varying degrees of maturity and in many different geographies; the effect of management changes and business initiatives; the regulatory, patent, competitive and other risks specific to Skype; the competitive, regulatory, credit card association, and other risks specific to PayPal, especially as it continues to expand geographically; the company’s need to manage other regulatory, tax, and litigation risks as its services are offered in more jurisdictions and applicable laws become more restrictive; the company’s ability to upgrade and develop its systems, infrastructure and customer service capabilities at reasonable cost; the company’s ability to maintain site stability and performance on all of its sites while adding new products and features in a timely fashion; changes in political, business and economic conditions, including conditions that affect consumer confidence or ecommerce growth; fluctuations in foreign exchange rates; the company’s ability to profitably expand its business model to new types of merchandise and sellers; and, the company’s ability to profitably integrate, manage and grow businesses that have been acquired recently or may be acquired in the future. The forward-looking statements in this release do not include the potential impact of any acquisitions that may be announced and/or completed after the date hereof.

More information about factors that could affect the company’s operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company’s investor relations web site at http://investor.ebay.com or the SEC’s web site at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the company on the date hereof. eBay assumes no obligation to update such statements.