Ebay’s numbers in the latest quarter were good. Very good. The on line auction company even raised its estimates for 2007 for a revenue range of $7.05 billion to $7.3 billion. This means the company’s annual growth could hit 22%. Previous estimates by the company put the 2007 increase as low as 17%. The purchase of on line ticket business StubHub should help the top line for this year.
But, the core auction business is slowing. According to The Wall Street Journal, the value of goods sold on Ebay (EBAY) rose 18% in 2006. That number was 30% in 2005 and 44% in 2004.
One part of the company is still on fire. PayPal, the on line payment system. Revenue at the unit grew 37% in the fourth quarter.
Ebay increased its share buyback program to $2 billion, which in theory, should help the company’s stock price.
But, there is another, and perhaps more attractive option for unlocking value at the firm. PayPal, Ebay’s auction business, and VoIP unit Skype are really three different animals. The company admits that Skype is a dog. PayPal relies on much of its revenue from the auction business, but it also has tens of thousands of customers off the Ebay platform.
If PayPal were its own public company, and Skype were sold to an LBO from for $1, the sum of the parts might well be worth more than the whole.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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