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EBay Projects Holiday Quarter Sales Short of Estimates

Spencer Soper

(Bloomberg) -- EBay Inc. gave a revenue forecast that fell short of analysts’ estimates, suggesting a management shakeup threatens the performance of the online marketplace during the busy holiday shopping season.

The company said fourth-quarter sales would be $2.77 billion to $2.82 billion, compared with estimates of $2.85 billion. The results announced Wednesday show last month’s departure of Chief Executive Officer Devin Wenig, who clashed with activist investors, could cloud the fourth quarter.

Wenig’s departure followed months of agitating by activist investors Elliott Management Corp. and Starboard Value, who have pushed for the sale of units including the ticket-resale site StubHub and the classified ads business. EBay said it continues to review the “role and value” of those units and would provide an update on StubHub before its next earnings release. Scott Schenkel, the chief financial officer, is serving as interim CEO of the San Jose, California-based company.

“The core marketplace business continues to struggle,” said Ygal Arounian, an analyst at Wedbush Securities Inc. “After all the noise about asset sales, the marketplace is what needs to ultimately improve and we’re not really close.”

The uncertainty about EBay’s next leader makes it more difficult to fix the struggling business. Wenig tried to freshen the company’s image with younger shoppers and made the site easier to navigate. While active buyers increased 4% in the third quarter from a year earlier, positive results have been slow in coming.

EBay reported gross merchandise volume, the value of all goods sold on its platforms, of $21.7 billion, down 4.4% from a year earlier and the third straight quarterly decline. Schenkel blamed the slowdown partly on new internet sales tax laws taking effect in the U.S. More customers are abandoning purchases at the last minute -- particularly on higher-priced items -- when they see as much as 9% added to the total price because of sales taxes, he said.

“We expect that headwind to grow in Q4 as new laws in California, Texas and nine other states take effect,” Schenkel said.

In the third quarter, EBay reported sales of $2.65 billion, unchanged from a year earlier and meeting analysts’ projections. Earnings, excluding some costs, were 67 cents a share, compared with analysts’ average estimate 64 cents, according to data compiled by Bloomberg.

The company also gave a forecast for adjusted profit of 73 cents to 76 cents a share in the period ending in December. Analysts, on average, estimated 76 cents.

EBay shares declined about 3% in extended trading on Wednesday, after closing in New York at $39.20.

(Updates with comments from CEO in the seventh paragraph)

To contact the reporter on this story: Spencer Soper in Seattle at ssoper@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Alistair Barr

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