eBay's Whitman out; guidance hurts

EBay's CEO Meg Whitman (right) will be replaced by John Donahoe when she steps down on March 31st.

NEW YORK (CNNMoney.com) -- EBay announced Wednesday that, as expected, chief executive Meg Whitman will be stepping down on March 31st.

The company also reported fourth-quarter results that exceeded Wall Street's estimates but eBay issued disappointing guidance for the first quarter and all of 2008. The stock fell over 5 percent after-hours on the news.

Whitman's decision to step down was expected. This March will mark her ten-year anniversary at eBay (EBAY, Fortune 500), and she has said that a CEO should not stay in his or her post longer than ten years.

"Meg's passion for all things eBay changed the world," said Pierre Omidyar, Founder of eBay and Chairman of the Board. "With humor, smarts and unflappable determination, Meg took a small, barely known online auction site and helped it become an integral part of our lives. We're all enormously grateful that Meg dedicated herself to stewarding eBay through its 10 most formative years."

Whitman will be replaced by John Donahoe. Donahoe is eBay's President of Marketplaces, a division of the company that accounts for more than 70 percent of its global revenues. Donahoe came to eBay in February 2005 from Bain & Company, where he served as worldwide managing director.

Separately, the online auctioneer reported that profit rose 53 percent in the fourth quarter due to strong growth at its PayPal, StubHub, and Skype units.

Revenue rose 27 percent to $2.18 billion, up from $1.72 billion in the same period last year, and beating Wall Street's expectations of $2.14 billion.

EBay said that net income came in $531 million, or 39 cents a share, in the fourth quarter. Excluding certain one-time charges, profits rose to $611 million, or 45 cents a share, beating analysts' consensus estimates of 41 cents per share.

"We're very pleased with the results for the quarter, which were strengthened by a solid holiday shopping season," said Whitman in the company's earnings release. "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."

For the 2007 fiscal year, eBay reported revenues of $7.67 billion, up over 28 percent from 2006. Net income for the full year, including a writedown related to the value of Skype in the third quarter, fell 69 percent to $348 million. Excluding this charge, profits rose 41 percent to $2.11 billion.

Still, the company issued sales and profit guidance for the first quarter that was lower than what Wall Street was expecting. The company also issued sales guidance for all of 2008 that was below analysts' consensus estimates.

eBay said that for the first quarter, it expects a profit, excluding charges, of 37 cents to 39 cents a share on slowing ecommerce business due to the slumping economy. Wall Street had been forecasting earnings of 40 cents per share. The company said sales would be in a range of $2 billion to $2.05 billion, well below consensus estimates of $2.15 billion.

"The recession will have a dampening effect on eBay." Citigroup analyst Mark Mahaney told CNNMoney.com.

The company's growth has slowed in recent years on a slowing auction business, a rise in competition from online retailers such as Amazon (AMZN, Fortune 500) and Google (GOOG, Fortune 500). Its stock price fell by about a third from a 52-week high above the $40 mark in October, to a one-year low of $26.02 on Tuesday.

Though the earnings forecasts and slumping stock have disappointed investors, Donahoe maintained a positive outlook. "EBay is not growing as rapidly as I would like, "said Donahoe in a conference call with investors, "[but] eBay's best days are ahead of it."

Donahoe said he believes the company's new initiatives will stimulate growth. Bob Swan, eBay's chief financial officer outlined a new, highly-anticipated pricing plan for auction sales. EBay plans to reduce up-front listing or "insertion" fees and increase fees for when the sales are completed.

"Insertion fees are necessary, because they motivate sellers to price items fairly," said Swan. "The plan will shift the balance towards lower up-front fees and higher final fees." Swan said he believes the change will stimulate the velocity of trades on the site. Though he admitted that some risk will come with the venture, he said the plan will be positive for long-term growth as trade volume increases.

"They need to do it." said Mahaney. "I don't know what kind of effect it will have, but we've seen some considerable decline here. They need to do something."

Swan said the pricing change will initially hurt EBay's margins - which was seen in the company's disappointing first quarter guidance - but the plan will improve revenue in the future.

EBay's expectation for the full year, however, is $1.63 - $1.67 a share, which is in line with analysts' forecast of $1.66.