Web-based call service Skype’s revenue was $126 million, up 61 percent. Skype added 33 million new users worldwide, with 309 million registered users.

By Eric AuchardWed Apr 16, 8:09 PM ET

EBay Inc (EBAY.O) posted a 22 percent rise in quarterly net profit, topping Wall Street’s average estimate, as pricing changes increased online auction listings and pushed revenue above all forecasts.

The company also raised its 2008 revenue target, but its stock barely rose as executives said the softening U.S. and UK economies had modestly slowed demand and that auction customers at the end of the quarter were less inclined to buy.

“While we are raising our full-year outlook, we still remain cautious about the economic environment,” Chief Financial Officer Bob Swan told investors on a conference call following the report on Wednesday.

“We saw a slowing in terms of buyers’ propensity to buy toward the end of the first quarter,” Swan said.

EBay is in the midst of a long-term plan to revive growth in its core auctions business that involve sweeping changes to how buyers and sellers deal with one another on the site.

Chief Executive John Donahoe said eBay sellers had responded to pricing changes and stepped-up customer service requirements by increasing the volume of new auction listings during the last six weeks of the first quarter. By Eric AuchardWed Apr 16, 8:09 PM ET

EBay Inc (EBAY.O) posted a 22 percent rise in quarterly net profit, topping Wall Street’s average estimate, as pricing changes increased online auction listings and pushed revenue above all forecasts.

The company also raised its 2008 revenue target, but its stock barely rose as executives said the softening U.S. and UK economies had modestly slowed demand and that auction customers at the end of the quarter were less inclined to buy.

“While we are raising our full-year outlook, we still remain cautious about the economic environment,” Chief Financial Officer Bob Swan told investors on a conference call following the report on Wednesday.

“We saw a slowing in terms of buyers’ propensity to buy toward the end of the first quarter,” Swan said.

EBay is in the midst of a long-term plan to revive growth in its core auctions business that involve sweeping changes to how buyers and sellers deal with one another on the site.

Chief Executive John Donahoe said eBay sellers had responded to pricing changes and stepped-up customer service requirements by increasing the volume of new auction listings during the last six weeks of the first quarter.

Buyers are trusting eBay more as a result, he said. EBay also has begun using discount coupons to reward frequent top buyers. These offers will expand through 2008, Donahoe said.

First-quarter net income rose to $459.7 million, or 34 cents a share — buoyed by a buyback of 3 percent of its shares — compared with the year-earlier-quarter’s $377.1 million, or 27 cents per share. Revenue rose 24 percent to $2.19 billion.

EBay raised its projected 2008 growth rate by 2 to 3 percentage points from a downbeat January forecast, setting its net revenue target at $8.7 billion to $9.0 billion.

“Bottom line, the pricing changes they instituted in February are starting to have the desired effect,” Jefferies & Co analyst Youssef Squali said. “The long-term sustainability of these benefits, beyond the next few quarters, is the big question now.”

Following the earnings, eBay shares edged up to $32.15 in extended trade from a close of $32.12, up 1.7 percent on Wednesday. In anticipation of the results, the stock has jumped 25 percent since mid-March, when it traded at two-year lows. EBay got a lift from international businesses, which made up 55 percent of revenue. Translating foreign sales to dollars lifted revenue by $110 million alone. While U.S. revenue grew 16 percent, overseas sales grew at twice that rate.

SIGNS OF PROGRESS

The company is benefiting from rising cross-border trading as international buyers seek out deals on the company’s U.S. auction site. Such trade generated 18 percent of quarterly revenue as eBay serves as a substitute for discount shopping expeditions to Manhattan or other U.S. cities by tourists.

“Almost a fifth of our trade is cross-border,” Donahoe said. “We saw a lot of buyers in Europe buy on the U.S. site because of the weakening U.S. dollar.”

Excluding one-time items, the San Jose, California-based company reported a profit of $562 million, or 42 cents per diluted share, versus $460 million, or 33 cents per diluted share, a year ago. It spent $1 billion on share buybacks.

Profits topped analysts’ average estimates by 3 cents per share, both in net terms and excluding one-time items.

Net revenue for eBay’s core marketplaces business grew 19 percent to $1.48 billion. PayPal, its online payments service, grew 32 percent to $582 million. Web-based call service Skype’s revenue was $126 million, up 61 percent. Skype added 33 million new users worldwide, with 309 million registered users.

First-quarter new eBay listings rose 2 percent on the fourth quarter and 10 percent from a year ago. But for merchandising improvements to translate into stepped-up revenue growth, eBay must do more to attract new buyers, analysts say.

In a sign eBay may have begun making progress winning back users, it reported that active users on the site grew 1 percent in the first quarter, the first increase in several quarters.

EBay is experimenting with giving PayPal users buying on eBay a money-back guarantee. In June, in Australia, eBay will begin guaranteeing purchases using PayPal up to A$20,000 in value and then expand the program to other countries.

“We had some good, early progress. We still have a lot to do,” Donahoe said. “But I think we are going to make a lot of progress this year.”

(Additional reporting by Michele Gershberg in New York; Editing by Braden Reddall)

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