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1 Financial Analysis of eBay

Financial Analysis of eBay Gary England Campbellsville University BA 620 Managerial Finance Dr. Sonny Onyiri

2 Financial Analysis of eBay

Table of Contents
CHAPTER PAGE Executive Summary .................................................................................................. 3 Company History ..................................................................................................... 5 Competition ............................................................................................................... 7 y SWOT Analysis .............................................................................................. 7 Financial Analysis ................................................................................................... 14 y Annual Financial ........................................................................................... 14 y Ratios ............................................................................................................ 17 y Economic Forecast ........................................................................................ 18 y NPV Ratios ................................................................................................... 21 Recent Company News ........................................................................................... 22 Conclusion ............................................................................................................... 22 References ............................................................................................................... 25

3 Financial Analysis of eBay

Executive Summary
The following analysis has been completed after substantial research has been analyzed in order to understand the eBay company and its surrounding factors. This includes an industry analysis to understand the general type of business where eBay places its self and how they fit into the industry as a whole. Following the industry analysis, I conducted an internal analysis of the company and also its top competitors. With this information it is possible to gauge the eBay company in regards to those in which they are competing to reach a broad understanding of what needs to be completed internally to become a more successful company. With this previously stated information obtained I will be able to apply my recommendations and strategies to solve issues which are currently being seen in eBay. The final step in our company research and analysis will come from forecast of the eBay financials to understand where they currently sit and where they are and should be valued. The internal industry analysis has been completed in order to understand the eBay company and its competitors. This has been completed through the study of the industry value chain, key success factors for the companies in this industry, an industry forecast and also details for eBay and two of its main competitors, Yahoo! and Amazon. The steps in the process of studying each of these companies individually provides us information on, in what areas the business of eBay could be improved or retained in order to beat their competitors in this market. These details can be used further as I move on into my strategic recommendation to increase the performance of the company. I have provided in-depth recommendations on what would benefit eBay and also how these can be implemented within their company. The main focus of bettering the companys

4 Financial Analysis of eBay success will be on retaining and growing their core business. This will allow their managers to focus on the business in which they have the greatest expertise and also to offer a diversified product. This section includes detailed steps on how each strategy should be used with the company. Also included is a timeline of when each of these strategies should occur, in order to maximize the benefits of my recommendations. Finally, my research analysis involves financial forecasts for the company, including but not limited to the actual worth of the company rather than where their company stands currently. The previously mentioned topics will be discussed in detail here within, in order to conclude my analysis for the successful organizational change to occur at eBay.

5 Financial Analysis of eBay

Company History
eBay was founded by Pierre Omidyar's in his San Jose home in September of 1995, under the name Auction Web. From its early beginnings it was meant to be a marketplace for the sale of goods and services for a variety of interested individuals. It was incorporated in 1996, and has since grown to become the worlds largest most financially successful online auction company. After realizing the overall potential of his idea, Pierre and his cofounder Jeff Skoll brought on Meg Whitman, as CEO, to efficiently handle the growing popularity, and sustain eBays success. Meg earned a MBA at Harvard Business School, and had gained high acclaims and top-shelf experience at the successful company of Hasbro. With the addition of Meg Whitmans expert experience eBay soon expanded rapidly to service a wide variety of buyers and sellers, and in September of 1998 the company went public. The shares were initially offered at $18 and immediately rose to $47 by the end of the day. The company has not faltered since, rising to revenues exceeding $700 million by 2001. In its short history, eBay has chosen several different paths than traditional companies to get to where it is. Most all of eBays advertisement was done through word of mouth and through agreements with a few Internet companies such as AOL and Disney. The large portion of savings from low advertising costs is invested in innovative marketing strategies to keep them ahead of its competitors.

I believe that eBay is has achieved such an incredible amount of success in such a relatively short period of time because of its beginning philosophy of giving power to its users. With that foundation of loyal users it is able to expand its name by word of mouth and continue to grow to service a wider variety of users and their products. Also eBays ability of provide

6 Financial Analysis of eBay access to such a broad variety of products at relatively low prices will continue to attract more users and profits in the future. eBay is a remarkably efficient market created by connecting individuals who wouldn't otherwise be connected. It was the world's first example of online social networking. While skeptics questioned whether people would trust doing business with strangers online, Pierre firmly believed that people are basically good, and that any issues would work themselves out by the community.

Since its creation, eBay has grown to have a presence in 39 markets (including partnerships and investments) with more than 90 million eBay.com users worldwide, trading more than $1,900 worth of goods each second. In 2002, the eBay community made it clear that they preferred using PayPal as an online payment method. So eBay acquired PayPal, which brought new efficiencies to e-commerce and redefined possibilities for eBay's future.

The company has since expanded by acquiring innovative businesses, such as Shopping.com, StubHub, Bill Me Later and others, which have positioned the company as the global leader in e-commerce and payments. Building on Pierre's entrepreneurial legacy, eBay continues to passionately believe in the potential of technology to connect people around the world.

7 Financial Analysis of eBay

Competition
Since participating in the auction industry requires only a web presence, at first sight the threat of competition looms heavily over eBay. In fact, two online heavyweights have entered the market, Yahoo and Amazon.

These competitors have not only longer operating histories, but larger customer base and greater brand recognition. So why does eBay currently control more than 80% of the online auction market, with Yahoo and Amazon lagging far behind?

In my opinion, the answer lies in a combination of penny pinching and first mover advantage. eBay utilized their first mover advantage admirably, quickly and constantly building a community of buyers and sellers. The best way to compare eBay to its competitors is through a SWOT analysis.

Weaknesses Strengths Brand Name Economies of Scale Internet Sales Open Seller Platform Low-Cost Provider Paypal Market Leading Low Debt Opportunities International Expansion NetBook Computers Department Store Failures Non-Business Related Acquisitions Moving away from auctions being the primary business Mature Market

Threats Amazon.com E-commerce Tax Litigation Economy

8 Financial Analysis of eBay Strengths Brand name - Strong brand name helps to increase margins by charging premium prices for goods, because customers perceive a higher standard of quality from companies with strong brands. The strong brand name eBay has obtained has increased the number of customers they draw into their business because of the common name they have throughout consumers. Economies of scale - eBay has economies due to its large supply of buyers and sellers. Having a large number of active users as they do, they are able to protect themselves from new entrants to the industry. This retains their market share and provides them with a strong foundation for successful business. Internet Sales Internet sales are increasing at a fast pace. This has come to benefit eBay and the industry as a whole because of the recent advancement to using technological based systems to run the businesses. The continued growth of the internet and also its expected growth into the future greatly support eBays business and success. Open Seller Platform - The ability to allow businesses to sell their products on a website enhances liquidity for such products, gives better options to users and allows the platform provider to increase the number of goods they have for sale, which increases their revenue and margins. When buyers can get new or used products from one place, the customer relationships between the buy and the preferred platform will increase. Low-Cost Product Low cost provides significant barriers to entry if that company is the only low cost product among many other higher cost products. Also, companies that save businesses money will also benefit when businesses have to cut cost over time, either through greater

9 Financial Analysis of eBay efficiency or cheaper goods. eBay is able to have low costs in an industry which requires somewhat of a technological investment, which allows it to have high margins. Paypal/Non-Cash Society - The growing use of credit cards and debit cards are increasing the trend towards a cash-less society. Card companies and those that process card transactions should benefit from the shift away from using cash. The growing use of these forms of payment will allow Paypal to generate substantial growth to the eBay company. Market Leading - Market leading position brings many benefits to those companies. Generally, they possess good brand names, economies of scale, higher margins, revenues and other significant benefits, such as the ability to raise debt at lower cost. They generally have a more stable business than their competitors and are more likely to acquire other businesses as opportunities come about. Low Debt Without long term liabilities facing the company, eBay is able to avoid constant interest payments which cut into cash flows each period. This lowers the risk of the company because without debt taken out, there is no default risk of the company. Free cash flows can then be used to finance growth of the company and on innovation, rather than making payments to bondholders. Weaknesses Non-Business Related Acquisitions - The acquisition of Skype did not add value for eBay's customers. Non-essential acquisition can distract a company and dilute the management expertise and financial results. It would be a significant weakness for eBay to continue making non-essential acquisitions.

10 Financial Analysis of eBay Moving away from auctions being the primary business Through various business related moves, eBay has faced weaknesses in their company distracting their focus away from their core business of auctions. This has placed management in a situation to run the eBay company with a strategy different then what had been put in place in the past and also what has been successful for them. The last part of the weakness which affects the company is getting outside the range of managements expertise. Mature Market - Mature markets result in slower growth of revenue and lower margins as companies begin to compete on price and service versus the past driver of value, growth. Competitors usually have to differentiate themselves in the customer's eye to maintain value. Some become lost cost suppliers, high quality suppliers of products, or niche suppliers of services. If companies are able to create a natural monopoly (economies of scale, buyer power, etc.) then mature markets can turn into cash cows, where the main company needs very little investment to produce very large amounts of free cash flow. eBay must handle their situation as a mature company by introducing new strategies to enhance their business. Opportunities International Expansion Because of the increasing growth in buyers globally, there are many opportunities in globalization for growth. The type of business eBay is in has the potential to be successful in other markets if they can fix some of the problems with their services that other locations expected. NetBook Computers - Low cost notebook computers are gaining in popularity. They run on the Linux platform, which undermines Microsofts Windows operating software system.

11 Financial Analysis of eBay Department Store Failures - Slowdown in department store's popularity may cause long-term growth problems. This also affects all merchandisers who want to sell their clothing through department stores. Threats Amazon.com - Increased competition is a threat to EBays business, but Amazon.com provides an acute threat to eBay, through their advancement into used goods and auction style online commerce. E-commerce Tax - Potential tax on e-commerce transactions will decrease the demand for goods online. This will affect the prices of services which need to be charged in order to make up for the increase in costs for the company, suppliers and buyers. Litigation - Litigation risk might not be priced into the beta. The potential of litigation risk increases the uncertainty for companies, which lowers the value of a company. Until the risk is gone, a company tends to trade based on any news concerning the litigation potential. Economy - A global slowdown or recession will hurt all companies, but mostly those whose products sell in economies that experience the worst declines. Commodity prices will also decline, because economies slow down and the current resource supply is static; therefore, oversupply ensues. A global slowdown also affects advertising/service companies, which are typically very cyclical industries.

Rivalry in the e-commerce sector has always been an area of competition since its boom began in the late 1990s and will continue as the increase in internet usage continues on. The ecommerce industry is expected to see double digit growth rates over the next five years (Shopall,

12 Financial Analysis of eBay 2008), and this increase will continue to attract more and more businesses hoping to take advantage of the profits. This intense rivalry which has been seen and will continue to be seen by eBay and its competitors means it is necessary to determine exactly what the customers want and what should be done to win the market share.

The risk of entry by potential competitors is relatively high due to low barriers to entry. New competitors can launch new sites at a nominal cost using commercially available software. This low barrier to entry will cause competition to intensify in the future. Also due to the broad range of products sold at eBay there are many more opportunities for new competitors to enter in more specific market segments. The degree of rivalry among established companies within eBays industry is very high. This high degree of rivalry is very common in discount retail industry due to the high concentration on being the price leader. EBays competition is very broad and varies with each of its different products. eBay competes closely with many well know broad-based companies such as traditional department and general merchandise stores, as well as a large variety of online retailers. Due to this complex competitive industry, eBay must concentrate on many competitive factors such as: ability to attract buyers, volume of transactions and selection of goods, customer service, system reliability, brand recognition, and many others to keep their edge. The bargaining power of buyers is low because the seller sets the prices of the products and because a majority of the sales are in an auction platform. This gives eBay and the buyer less control of the products prices, but in most cases the large amount of sellers per product keeps the prices low and competitive. The buyers benefit from the competition of the sellers, convenience of a trade environment, and not on the power of price bargaining.

13 Financial Analysis of eBay The bargaining power of suppliers is relatively high because eBay must keep its fees and commissions low in order to attract and keep loyal sellers. Sellers are the suppliers of the products and are able to pick from different auction companies and select one offering the lowest fees and commissions. The ability for the suppliers to select the company offering lower selling costs and higher profits per sale, forces eBay to remain competitive in selling costs. With the power more in the suppliers hands eBay is required to satisfy their needs with higher customer service, more convenient selling platform, and lower selling costs in order to keep a large supplier base and attract new sellers. The threat of substitution is high due to the growing number of online auction and shopping sites. Online retail is a highly volatile and rapidly growing industry where substitutes and rivaling competitors can emerge with relatively minimal costs and in a short amount of time. This high degree of threat forces eBay to continuously use its strong finances to maximize user satisfaction and to acquire high quality auction properties in order to remain dominant in its industry. After analyzing the forces of this industry I believe that the competition is very intense. In order to succeed in this industry a company must continuously improve all of its aspects of business. If the company becomes content or satisfied with its success it will be quickly surpassed or replaced by another competitor. This industry is extremely volatile and it is imperative to invest in improving your company in order to remain competitive.

14 Financial Analysis of eBay

Financial Analysis
Overview eBay is an online company that provides online marketplaces for the sale of goods and services. It also provides commerce, platforms, online payments services and online communications offerings to individuals and businesses. The company primarily operates in the US. It is headquartered in San Jose, California and employs 15,500 people.

Annual Financials for eBay Inc.


All amounts in millions except per share amounts.

12/2010

12/2009

12/2008

12/2007

(TTM)
9,156.27

(TTM)
8,727.36

(TTM)
8,541.26

(TTM)
7,672.33

Operating Revenue

Total Revenue Adjustment to Revenue Cost of Sales Cost of Sales with Depreciation Gross Margin
Gross Operating Profit

9,156.27 0.00 1,991.93 2,564.67 7,164.35


7,164.35

8,727.36 0.00 1,931.50 2,479.76 6,795.86


6,795.86

8,541.26 0.00 1,743.17 2,228.07 6,798.09


6,798.09

7,672.33 0.00 1,365.37 1,762.97 6,306.96


6,306.96

R&D SG&A Advertising Operating Profit


Operating Profit before Depreciation (EBITDA)

908.43 803.07 725.60 619.73 3,418.44 3,686.89 3,227.88 3,081.41 0.00 0.00 0.00 0.00 2,053.57 1,456.77 2,075.68 613.18
2,837.47 2,305.90 2,844.62 2,605.83

Depreciation Depreciation Unreconciled Amortization Amortization of Intangibles Operating Income After Depreciation Interest Income Earnings from Equity Interest Other Income, Net Income Acquired in Process R&D Interest Restructuring and M&A Other Special Charges

762.47 810.95 719.81 601.71 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 189.73 262.69 234.92 204.10 2,075.01 1,494.95 2,124.80 2,004.12 44.88 1,422.39 107.88 154.27 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -21.44 -38.19 -49.12 0.00 0.00 0.00 0.00 -1,390.94

15 Financial Analysis of eBay Total Income Avail for Interest Expense (EBIT) Interest Expense
Income Before Tax (EBT)

2,098.45 2,879.15 2,183.56 0.00 0.00 0.00


2,098.45 2,879.15 2,183.56

767.45 16.60
750.85

Income Taxes Minority Interest Preferred Securities of Subsidiary Trust Net Income from Continuing Operations Net Income from Discontinued Ops. Net Income from Total Operations Extraordinary Income/Losses Income from Cum. Effect of Acct Chg Income from Tax Loss Carry forward Other Gains (Losses)
Total Net Income

297.49 0.00 0.00

490.05 0.00 0.00

404.09 0.00 0.00

402.60 0.00 0.00 348.25 0.00 348.25 0.00 0.00 0.00 0.00
348.25

1,800.96 2,389.10 1,779.47 0.00 0.00 0.00 1,800.96 2,389.10 1,779.47 0.00 0.00 0.00 0.00
1,800.96

0.00 0.00 0.00 0.00


2,389.10

0.00 0.00 0.00 0.00


1,779.47

Normalized Income Net Income Available for Common Preferred Dividends Excise Taxes
Per Share Data

1,822.40 2,427.28 1,828.59 1,739.19 1,800.96 2,389.10 1,779.47 348.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Basic EPS from Continuing Ops. Basic EPS from Discontinued Ops. Basic EPS from Total Operations Basic EPS from Extraordinary Inc. Basic EPS from Cum Effect of Accounting Chg Basic EPS from Other Gains (Losses) Basic EPS Total Basic Normalized Net Income/Share Diluted EPS from Continuing Ops. Diluted EPS from Discontinued Ops. Diluted EPS from Total Operations Diluted EPS from Extraordinary Inc. Diluted EPS from Cum Effect of Accounting Chg Diluted EPS from Other Gains (Losses) Diluted EPS Total Diluted Normalized Net Income/Share

1.38 0.00 1.38 0.00 0.00 0.00 1.38 1.40 1.36 0.00 1.36 0.00 0.00 0.00 1.36 1.38

1.85 0.00 1.85 0.00 0.00 0.00 1.85 1.88 1.83 0.00 1.83 0.00 0.00 0.00 1.83 1.86

1.37 0.00 1.37 0.00 0.00 0.00 1.37 1.41 1.36 0.00 1.36 0.00 0.00 0.00 1.36 1.40

0.26 0.00 0.26 0.00 0.00 0.00 0.26 1.30 0.25 0.00 0.25 0.00 0.00 0.00 0.25 1.25

16 Financial Analysis of eBay Dividends Paid per Share


Additional Data

0.00

0.00

0.00

0.00

Basic Weighted Shares Outstanding Diluted Weighted Shares Outstanding

1,305.59 1,289.85 1,303.45 1,358.80 1,327.42 1,304.98 1,312.61 1,376.17

The company recorded revenues of $7,672.3 million during the financial year ended December 2007 (FY07), an increase of 28.5% over FY06. The operating profit of the company was $613.2 million during FY2007, a decrease of 56.9% compared to FY06. The net profit was $348.3 million in FY07, a decrease of 69.1% over FY06. eBay currently has set itself into a position of strong financial success and growth in the key areas of its business. Sales have increased due to the strengths of past acquisitions and low costs have returned high profits back into free cash flow. Cash is being held and used to advance success in fast-growing businesses in order to receive quick returns for stockholders. Cash is currently listed at $3.8 billion and with borrowing power increase by $1B to about $2B; they are in a strong position to continue their advancement in key acquisitions. Another strong financial factor to consider for eBay is that it has permitted leverage of 3x EBITDA, up from their past permitted leverage of 2x, allowing for the use of more debt in their cost of capital structure. The stock market seeing eBay as a strong company has been important when they are adding capital and their current market capitalization is $15.70B. Through the use of this capital being raised through the sale of its own stock eBay has built two strong forces to finance their growth, debt and equity. This chart provides financial ratios for eBay from 2005-2008. All data used is year end, and with such we can determine how eBay has done over time.

17 Financial Analysis of eBay Comparison of Competition, 2005-2008 Profitability ROA ROE Operating Profit Margin Net Profit Margin Liquidity Current Ratio Quick Ratio Leverage Debt/Assets Debt/Equity Interest Coverage Activity Fixed Asset Turnover Receivables Turnover Total Asset Turnover Days Sales Shareholder's Return P/E Ratio Dividend Payout Ratio 0 0 0 12.80 0 6.0 16.153 0.460 22.6 6.6 16.7 .47 21.9 7.2 17.6 .53 20.8 7.4 18.7 .55 19.6 0.139 0 0 0 .064 0 272.7 2.144 1.80 1.97 1.59 2.3 1.87 1.7 1.6 10.96% 12.77% 31.7% 23.8% 8.9% 10.74% 23.8% 18.86% 2.41% 3.08% 8% 4.54% 11.11% 14.92% 23.25% 20.04% 2005 2006 2007 2008

The ROE for 2008 is currently outperforming all time periods going back to 2005. This is an impressive feat given the current economic situation and displays eBays goal of working for its shareholders. This will be beneficial for the company, as the market will see it as an owner focused company and should stimulate more investor interest. The other area of success for the company financially is its liquidity ratios. By holding low amounts of debt and liabilities, these

18 Financial Analysis of eBay statistics look very good for the health of the company. These ratios have stayed consistent over time, proven the financial strength of eBay. Although there are strong financials to show for this company, there are also areas which show faults and need improvements. To start, operating profit margin has decreased on average since 2005. This shows a decrease in net profit relative to the amount spent on operating expenses. This will need to be improved in order for the company to be as successful as it should be financially. The other area of concern deals with the financial ratios for days sales. This number has decreased by 15% since 2005 and this is a result of less sales happening on a daily basis for the company. Slowed sales come to equal less efficient performance for the company and also a need for a growth strategy to be implemented. Economic Forecast for 2011 The year 2011 is expected to bring a turnaround in both the economy as a whole and also in this industry. This period will be the end of an economic recession, as the current market will come to a trough. This leads us to believe in the economy and eBay will need to weather more of a downturn before becoming successful in the near future during expansion. Economic Forecast to 2014 By the year 2014, the United States will be in the midst of economic expansion and this will be the opportunity for eBay to see large successes in financial performance. eBay is expected to grow at a rate of 31.59% in revenues over the next five years. Following this high growth period, analysis on eBays financial forecast was completed using a conservative 6.7% for their stable period of revenue growth.

19 Financial Analysis of eBay Recession Resistant Retailer This firm saw its quarterly revenue in 2008 growth bounce by 19.7% (year-over-year), while quarterly earnings growth jumped 22.5%. Its users sold $927 million in goods during the second quarter, which dumped $35.7 million into the companys funds in transaction fees. These are positive results, given the weak state of the current economy and inflation forcing consumers to cut back on purchases. eBay is able to see successes during this time period because of the type of products they offer and being an e-commerce based company has aided in their success in our heavily internet focused society. Payment Services Business to Diversify The other area which has allowed eBay to stay stable during times of turmoil is having Paypal in its company portfolio. Having these two companies working together, diversity is created between the two and this limits the risk of the eBay company being the only member of the portfolio. The reason Paypal has been successful for this company is its relevance to the business which is occurring and also its flexibility to expand into other companies. Present Value of Economic Value Added Using the FCFFEVA model coded by Damodaran, we can first determine the present value of the economic value added by the company of eBay. In order to complete this model we have used the financial results from the year end 2008 financial statements and also calculated forecast, for both the growth period and stable growth period for the company. The main assumptions taken for this model were that of eBay choosing to take on some debt during the stable period in order to lower their cost of capital in the company. The other decisions made

20 Financial Analysis of eBay were that of remaining conservative in the near future regarding financials and also for the future, as these items are difficult to predict with certainty. This returns results of $39,184,331,993. This amount of money is the value eBay has added to the economy through its growing earnings forecasts. Present Value of the Firm Value of firm has been calculated using the free cash flow method and this equates that the eBay company is worth $47.05B. In the market eBay is currently reporting company value of $23.17B. As can be clearly seen, the valued company worth is much more than the company has been valued in the market. Lastly, we have calculated the valuation of the share price. The free cash flow method has returned a value share price of $35.98, while the current share price is $17.23. Using these numbers we can determine that eBay is currently much undervalued and this represents that investors have other beliefs about the current situation of the company. It seems as though there could be worries about eBays current situation as a company which has not obtained investor trust in the company. This, along with the current economy placing many stocks in a value position, has placed this stock price in an undervalued position.

FIRM VALUATION Value of Firm - Value of Debt Value of Equity Value of Equity per Share $ $ $ $ 47,052,148,638 1,000,000,000 46,052,148,638 35.98

21 Financial Analysis of eBay PV of EVA + Capital Invested + PV of Chg Capital in Yr 10 = Firm Value $ $ $ 39,184,331,993 10,587,300,000 (2,719,483,355)

2009 $ 47,052,148,638 2014 $79,645,280,835

2010 $ 53,044,205,188 2015 $86,112,845,792

$ 47,052,148,638 Value of Firm by year 2011 2012 $ 59,454,140,700 2016 $92,321,162,784 $ 66,168,727,693 2017 $98,367,906,906

2013 $ 72,998,197,277 2018 $104,589,358,409

22 Financial Analysis of eBay

Recent Company News


eBay has recently announced that it has agreed to acquire Magento Inc., the creator of Magento, a leading open source ecommerce platform. The deal follows eBays acquisition of a minority stake in the company in 2010. Upon closing of the transaction, eBay will own 100 percent of the outstanding shares of Magento.

The Magento platform serves tens of thousands of merchants worldwide and is supported by a global community of solution partners and third-party developers. Magento is a feature-rich, open-source, enterprise-class commerce solution that offers merchants a high degree of flexibility and control over the user experience, catalog, content and functionality of their online store. Magento Go, the companys hosted software-as-a-service solution, provides small and growing merchants with the tools to help them succeed online from payments to inventory management. Magento is a Los Angeles-based company with more than 290 employees.

X.Commerce, eBays newly created integrated open commerce platform group, is focused on leveraging the companys assets and partner technologies to build a strong, robust developer community as a resource for merchants and retailers of all sizes.

eBay does not expect the acquisition of Magento to have a material impact on its financial guidance as issued in conjunction with its first quarter earnings release on April 27, 2011.

23 Financial Analysis of eBay

Conclusion
eBay had taken off as an early leader in e-commerce in the late 1990s with an auction model that guaranteed consumers could find the best price on many used and leftover items. I would recommend a couple of different strategies for eBay to move forward in the future. The first strategy leads the company for the impending changes by focusing back on auction business rather than secondary-market Second; eBay will be able to cover up the transformative costs by selling Skype. Skype is not directly related to the auction business. To ensure future long term growth of eBay, the company would have to enter the Chinese auction market. China will overtake America with the largest number of Web surfers as early as 2011. After two or three years of change, eBay will be positioned in Global markets. Moreover, eBay will continue to grow, and providing a consistent stream of profit that will reinforce eBays long term position as market leader. I believe that eBay has the resources and competencies to strive for its overall generic strategy. If eBay continues to utilize its resources and capitalize on its competitive advantage then it should continue to achieve success in the future. eBays generic strategy is very broad which I think is important because they compete in many different markets. Constantly striving for their overall strategy, as well as, improving and expanding their core competencies will help eBay to remain ahead of its competition. eBay is involved in many different markets such as business-to-business, specific categories of goods, broad-based goods, and other online auction sites. This wide variety of markets makes it difficult to dominate each one, but eBay is the leading online auction site. eBay is also near the top in competition in all of its other markets. As eBay continues to expand its

24 Financial Analysis of eBay user base and product selection, it will continue to strengthen its competitive advantage. eBay is involved in many volatile markets prominently based on price leading and product selection, and it must strive to constantly improve all of its aspects of business in order to remain competitive.

25 Financial Analysis of eBay

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26 Financial Analysis of eBay Hsiao, A. Invest in the World Through eBay. Retrieved May 23, 2011, from About.com Website: http://eBay.about.com/od/eBaylifestyle/a/el_micro.htm Is technological innovation enough in order to secure competitiveness? Retrieved 25 May 2011. http://209.85.173.132/search?q=cache:RE6QIO_VuuYJ:www.infosoc.gr/NR/rdonlyres/B89D5C 8B-BD46-41F0-A4486166D33049A5/1481/Istechnologicalinnovationenoughinordertosecurecomp.doc+eBay+innovati on+filetype:doc&hl=en&ct=clnk&cd=1&gl=us Konrad, R. (2007.) EBay rolls out social-networking features. Retrieved May 23, 2011, from MSNBC Website: http://www.msnbc.msn.com/id/21213766/ Morningstar. Morningstar key ratios. Retrieved May 12, 2011. www.morningstar.com. Shopall. (February 5, 2008). USA: E-commerce sales to boom for the next 5 years. Retrieved May 24, 2011 from Website: http://shopall.blogspot.com/2008/02/usa-e-commerce-sales-toboom-for-next-5.html United States Securities and Exchange Commission (2009). eBay Annual Report. Retrieved June 8, 2011, from http://idea.sec.gov/Archives/edgar/data/1065088/000095013409003306/f50770e10vk.htm#102. Wharton. (2005.) Can eBay continue to defy gravity? Retrieved June 5, 2011, from CNET News Website: http://news.cnet.com/Can-eBay-continue-to-defy-gravity/2030-1069_3-5592976.html Yahoo finance. Company Profile. Retrieved June 8 2011. http://finance.yahoo.com/q?s=AMZN Zinberg, David. (December 14, 2007). Success Story. Bidz.com Auctions: Consumers Love to Win. Retrieved May 24, 2011 from Website: http://www.ecommercetimes.com/story/60580.html?wlc=1235707425

27 Financial Analysis of eBay