Shares of eBay Hit Seven Year Low

Not a good day for eBay (EBAY) shares, which are down 23% for the year to date, and now sit at their lowest level since 2001.

Highlighting the problem of counterfeit merchandise sold on the site, Bloomberg reports that the company provided a tip to German police that triggered the seizure of 20 tons of knock-off designer clothing last month. While it is certainly good to see eBay taking an aggressive posture on fake goods, the company clearly has an issue to resolve here. As Bernstein Research analyst Jeffrey Lindsay notes in the story, eBay is “only as good as its worst seller in the minds of its customers.”

The story also notes that eBay has been sued by a number of luxury brands for not doing enough to insure that sellers don’t peddle fakes. Among those who have filed suit over the issue are L’Oreal, LVMH Moet Hennessy Louis Vuittton, Rolex and Hermes International.

Meanwhile, eBay CEO John Donahoe and CFO Bob Swan Thursday spoke at the Goldman Sachs conference in San Francisco. According to a research note this morning from Goldman analyst James Mitchell, they indicated that a further reduction in insertion fees are not imminent, but that they will trend lower over time. They also said that the company is willing to sell Skype at the right price.

In Friday’s trading, EBAY was down 58 cents, or 5.1%, to $10.87.

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Comments

[Black Is White:]

Around the time of the Goldman Sachs appearance, ebay held an online "Town Hall". It was shocking in ebay's massive detachment from reality and the disaster that is ebay 2009.

The "Town Hall" could have been from May of 2008 when the ebay execs told everyone how great the new changes were (even though they were punishing and onerous to sellers, driving them away from the site).

The ebay execs were clueless.

Jump to the February 2009 "Town Hall" - they have had months to see in how many ways the May 2008 changes are failing; to hear the anger of sellers, to witness the flight of large sellers to other sites, to read the many online critiques of ebay's current management.

Their response - "La, la la, la". Everything is beautiful at the circus.

Of particular note were the words of the architect of ebay's severely flawed feedback changes, Brian "A neutral rating is a negative rating because it isn't a positive rating" Burke. Black is white because it isn't red.

He still maintains that there is something ethical about telling buyers that a "4" Detailed Seller rating is good yet punishing/suspending any ebay seller with a "4" average Detailed Seller Rating. Black is white because it isn't red.

Burke also believes that an ebay buyer who does not pay for an ebay item should be able to leave an ebay seller negative feedback for an auction never completed. Black is white because it isn't red.

As has happened in past "Town Halls" a caller phoned in with his own statistics showing how the May 2008 changes have damaged his ebay business. And as in similar past calls, Burke quickly hauled out the data, saying ebay's "research" showed that the seller's real world experience hadn't happened or was an anomaly. Black is white because it isn't red.

Well you know ebay, you could roll around in facts all day long...

Amazing that none of the ebay execs have yet to be removed from the site for poor performance.

Ebay is bad because ebay isn't good.

Mar 01 02:49 PM

[Allan kraig:]

what he said^

Mar 01 06:30 PM

[Et tu, Brute!:]

Black is White raises an interesting perspective that has actually been touched on before.

Perhaps it's time for the heat to be cranked up to inferno magnitude. With all the changes which have been SO horrendous, shouldn't the execs be getting ratings, also?

I am so sick of ebay talk. Yet I DO keep coming back. But less frequently. Been weaning away.

The idea of executive ratings, however, is food for thought.

Mar 01 11:52 PM

[nadine:]

In both the townhall and investor conference, JD spoke several times of the need to raise trust on the site for "users". However, it is clear from the context that the only users of the site he is solicitous of are the buyers on the eBay site. He is not at all solicitous of the sellers on the eBay site.

JD has turned selling on eBay into a minefield for sellers, and all you can say about the company's judgment is that good sellers are less likely to step on a mine than bad sellers. But when any seller steps on a mine, whether for some cause or in total innocence, that is 'too bad, so sad' for him, because eBay provides no appeal and no customer service to speak of. They also provide no customer service to the buyers they claim to be solicitous of, interestingly enough. Their customer service, in practical terms, consists of demanding that sellers provide the buyers with Nordstrom service at Walmart prices, while paying high fees to eBay.

Considering that sellers provide the lion's share of Marketplace and Paypal revenue, while buyers provide NONE, this is an extraordinary example of a company refusing even to acknowledge who its paying customers are, let alone catering to their needs. This creates a hostile and unsustainable business environment. Wall Street is only now catching up to what eBay employees and sellers have known for several years. But this management listens to neither.

Mar 02 03:19 AM

[Tippie:]

Ebay needs to tend to their stock holders first! They need to start paying a dividend to keep their stock holders on board. Not doing so will crash eBay regardless of seller and or buyer policies and disputes! When stock holders are fed up and finally dump ebay, it's all over. Donahoe in my opinion is a total DUNCE! He is taking down a great company and needs to be put in JAIL for stupidity!

Mar 02 11:26 AM

[Photoseeum:]

Top Execs failed to listen to their customer.......sellers... What they did not realize is that most of the sellers are also Ebays biggest buyers. Blindly they forced sellers to look for other venues to do business with. Sorta like telling you customer if the kitchen is too hot then get out. They forced alot of sellers to also start thinking about alternatives: Amazon, Bonazale, Ioffer and many more including building your own off site web site. Not a bad thing. But this kind of strategy should not go unpunished..........lo... at the stock prices now!

Mar 02 01:10 PM

[Philip Cohen:]

It must have broken their little hearts to pass up those fees coming from these counterfeiters. Now, what about them doing something "proactive" about shill bidding?

Regardless of who pays the fees, or who is now abusing the (broken) feedback system, or the DSR fiasco, or eBay’s latest “restraint on competition” attempt: the mandating of the offering of PayPal by sellers, or their failed attempt in Australia to mandate the use of PayPal exclusively, or their many other frantic, and sometimes stupid, manipulations of this auction system, the fact is neither eBay nor its sellers can flourish without the confidence of buyers, and the application generally of “hidden bidders”, particularly in the absolutely anonymous form (“Bidder x”) still suffered by users in the UK, Ireland and the Philippines (and in Australia until 3 February 2009), which serves little other purpose that to hide from view all but the most simple and blatant of the shill bidding that is undoubtedly now running rampant is not going to improve that confidence anytime in the future.

Contrary to eBay’s public claims, it can be demonstrated, beyond any doubt, that eBay has no “proactive” system in place for the control of shill bidding; their “system” is wholly reactive, solely in response to user reports of which there will now be fewer due to the increased level of anonymity of bidding aliases.

Can eBay be brought to heel? Ask yourself why eBay has not also masked the “winning bidder” in the U.K. as it has done in the rest of the eBay world? If there is any logical reason for doing so elsewhere then there cannot be any for not doing so in the U.K. The only reason that I can imagine is pressure from the U.K. OFT. Those of you who are as “put off” by the masking of bidder IDs as I am, should be complaining to your OFT and/or your local member of parliament, because government pressure is the only “stick” that eBay understands. The new UK Fraud Act clearly proscribes undisclosed vendor (shill) bidding as a “false representation” and therefore a criminal fraud. eBay should not be allowed to, in effect, facilitate such activity.

All eBay users should by now understand that no action taken (or not taken) by eBay has anything to do with benefitting or protecting eBay users (buyers or sellers): eBay’s every action (or lack thereof) is now purposed solely towards desperately attempting to improve eBay’s bottom line (undoubtedly more to do with the triggering of executive performance bonuses than with any consideration for shareholdes), and if at any time there appears to be some benefit to eBay users, that will be purely coincidental.

Many eBayers also now appreciate that the people currently in control of eBay are a bunch of arrogant, disingenuous (and the product of arrogance and disingenuousness usually is stupidity), corporate snakes; it’s very difficult to keep track of such snakes as they slither through the undergrowth; and that habitually “spinning” forked tongue doesn’t help any either!

Sadly, it has come to pass that if it was not for PayPal manning the pumps the good ship “eBay” would undoubtedly be considerably lower in the water. One has to wonder if Captain Donahoe and his fellow officers intend going down with the ship (like Captain Smith) or will they finally see the iceberg ahead and realise the error of their course and hand over to a more competent crew who will allow the ship to be towed back into port for some much needed repairs? (The 1950s classic Fonda/Cagney movie “Mr Roberts” comes to mind; alternatively, could we hope for another “Caine Mutiny”.)

And, a detailed rant on my pet peeve, “hidden bidders”, at
www.auctionbytes.com/f...

Mar 02 03:56 PM

[Tony P.:]

The small-time stock players don't actually matter - it's the institutional investors and what they think/do that is of any real concern. And who the hell knows what that group thinks?

Shortly after the April 29 stockholder meeting we should all know what that group thinks! Most likely, it will look like farther trust is placed upon the wrong captain, for a once-great ship.

Afterwards, the "small-time stock players" should give serious consideration to looking at the reality of the situation. They are no different from that group of ebay-users that Donahue refers to as "noise"; aka disgruntled sellers.

Both groups continue to hold out hope that ebay will "turn around" and finally provide a well-deserved dividend from their investment. To the group of sellers, that dividend takes many forms, but basically it consists of a return to a profitable experience while *using* ebay, not the other way around.

To that diehard group of "small time" ebay stockholders, the definition of dividend is simple: some cold, hard cash for their loyalty. Without going into details about how ebay views the word, Loyalty, suffice it to say that they possess none, to anyone.

You may view that hoard of $3B in cash as something that ebay can easily give up a portion and make everyone happy. You can forget that idea. It ain't gonna happen. Ever.

That moola is stashed offshore and any dooling out of it will result in its taxation. Nope, just ain't gonna happen. Even when ebay purchased BML, they borrowed against their credit line to do that; no readily-available cash was used.

So you see, stockholders, you are in the very same boat as those Noisy Sellers. Your carrot is that pile of cash; forever out of your reach. Our carrot is that pile of potential customers; forever out of our reach.

======================...

Q1: if that $3B didn't exist, what would be your take, as a potential investor, on the future of ebay? Take your time with an answer. Go look at all of the "data" on the company and be sure to disregard any reference to that $3B stash.

While you're at it, any notation for Goodwill and its assigned dollar amount might require a bit of disregard, as well. At its current valuation of a little more than $7B, that seems to be a bit on the high side.

Ebay even has that Goodwill figure *increasing* by Three-Quarters of a Billion Dollars ($768,245,000) over the previous year's amount.

Q2: Who here believes that ebay's business Goodwill got better in 2008?

Q3: Is the calculation of business Goodwill based upon hard data, or simply a figure that makes all other amounts "work out"?

Q4: What would the balance sheet look like if that $7B was reduced, or eliminated?

For extra credit: How can Goodwill increase, when almost all other factors decreased? And please don't talk about Goodwill that came along with acquisitions - once ebay acquired it, goodwill ceased to exist.

Mar 03 01:36 PM