eBay Inc. (Nasdaq:EBAY) today reported financial results for its fourth quarter and year ended December 31, 2008. The ecommerce company posted fourth quarter revenue of $2.04 billion, representing a $145 million year-over-year decrease due primarily to the impact on eBay of a stronger dollar and macroeconomic conditions globally. PayPal, Classifieds, text and graphical advertising and Skype performed well, growing revenue on a year-over-year basis. The company recorded net income on a GAAP basis of $367 million or $0.29 per diluted share, and non-GAAP net income of $524 million or $0.41 per diluted share.

For the full year, eBay Inc. posted $8.54 billion in revenue, net income on a GAAP basis of $1.78 billion or $1.36 per diluted share, and non-GAAP net income of $2.24 billion or $1.71 per diluted share.

GAAP operating margin decreased to 22.3% for the quarter, from 28.7% for the same period last year. Non-GAAP operating margin decreased to 32.8% for the quarter, from 34.6% for the same period last year. For the full year, GAAP operating margin came in at 24.3%, with non-GAAP operating margin at 32.1%.

eBay Inc. generated $684 million of operating cash flow and $525 million of free cash flow during the fourth quarter. The company’s full year operating cash flow was $2.88 billion and free cash flow was $2.32 billion.

"While the holiday season was tough and competitive, our overall results for 2008 were strong," said eBay Inc. President and CEO John Donahoe. "For 2008, we delivered double-digit revenue and earnings growth; made significant changes in our eBay business; and built a stronger, more diverse portfolio of leading e-commerce businesses. We will build on our strengths in 2009 while managing our business prudently in the continued challenging environment."

Quarterly Business Highlights

• eBay Inc. completed the acquisition of Bill Me Later to further extend PayPal’s leadership position in online payments.
• eBay Inc. completed the acquisition of Den Bla Avis (dba.dk) and BilBasen (bilbasen.dk) in Denmark to further extend its global leadership position in online classifieds.
• eBay Inc. completed the acquisition of Ticket Technology to enhance the selling platform for StubHub.
• eBay Inc. completed the acquisition of Positronic, a developer of predictive search technology, to enhance eBay’s efforts to bolster search functionalities on its ecommerce sites.
• eBay Marketplace sellers in the U.S. lowered shipping costs significantly – dropping the average shipping costs to buyers by 25% compared to the fourth quarter of 2007.
• Jack Sheng of eForcity, Inc., became eBay Marketplace’s first ever 1 million feedback seller.
• StubHub announced a partnership with the NHL franchise Buffalo Sabres, HSBC Arena and Tickets.com to enable an integrated ticketing solution for the team and arena.
• eBay’s Classifieds businesses averaged 91 million unique visitors per month during the quarter, representing an increase of 41% year over year.
• PayPal expanded its reach on the Web with the launch of merchant service account deals with American Airlines (U.S.), Hoyts Cinemas (Australia), Promarkt (Germany), Aldo Shoes (Canada), Jet2 (U.K.), Laura Ashley (U.K.), Amway (U.S.), and Zappos.com (U.S.).
• PayPal continued its global expansion with the launch of new localized sites in Mexico, Hong Kong and Singapore.
• PayPal extended its mobile strategy by partnering with RIM to become the exclusive payment option on the BlackBerry Application StoreFront.
• SkypeOut minutes reached 2.6 billion globally, a 61% increase year-over-year, driven by very strong adoption in Asia.
• Skype expanded its senior leadership team with the addition of Daniel Berg as chief technology officer and Christopher S. Dean as chief strategy officer.

Marketplaces

The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, recorded $1.27 billion in revenue, equating to a 16% year-over-year decline. The revenue drop was attributable to the impact made by the strengthening dollar and the slow-down of the ecommerce market globally on the eBay business. While average monthly unique visitors were down year over year, eBay remained the number one ecommerce site in the U.S., the U.K. and Germany during the 2008 holiday shopping season, according to Nielsen Online. Approximately 55% of Marketplaces revenue came from markets outside the U.S. Gross merchandise volume (excluding vehicles) was $11.47 billion for the quarter, a decrease of 12%, compared to the fourth quarter of 2007. Online classifieds as well as text and graphical advertising revenue grew during the quarter. eBay continues to focus on buyer and seller initiatives to accelerate sold items in the U.S., the U.K. and Germany.

Payments

The Payments business unit posted another solid quarter with $623 million in revenue, an increase of 11% year over year. Net total payment volume (TPV) for the quarter was $15.99 billion, an increase of 14% year over year. The revenue and net TPV growth was fueled by expanded adoption of PayPal Merchant Services across the Web and the inclusion of Bill Me Later, acquired on November 7, 2008. Active accounts reached 70 million, an increase of 23% year-over-year. The Payments business will continue to focus on greater penetration into the Marketplaces business as well as the acquisition of new merchants.

Communications

Skype contributed $145 million in revenue for the quarter, representing 26% year-over-year growth, and posted an eighth consecutive quarter of segment profitability. Skype added 35 million new users during the quarter and ended the period with more than 405 million registered users. In addition to growing its user base, Skype is focused on product strategies to enhance customer engagement.

Other Selected Financial Results

• Taxes — The GAAP effective tax rate for the quarter was 22%, compared to 21% for the fourth quarter of 2007. The non-GAAP effective tax rate was 24% for both the fourth quarter of 2007 and 2008. The GAAP effective tax rate for 2008 was 19%, while the full year non-GAAP tax rate came in at 21%.
• Cash and cash equivalents — The company’s cash and cash equivalents totaled $3.19 billion at December 31, 2008, compared to $4.22 billion at December 31, 2007.

Business Outlook

• First quarter 2009 — eBay expects net revenues in the range of $1.800 to $2.050 billion with GAAP earnings per diluted share in the range of $0.21 to $0.23 and non-GAAP earnings per diluted share in the range of $0.32 to $0.34.

Quarterly Conference Call

eBay will host a conference call to discuss fourth quarter results at 2:00 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, can be accessed through the company’s Investor Relations web site at http://investor.ebay.com. In addition, an archive of the webcast will be accessible through the same link.

About eBay Inc.

Founded in 1995, eBay Inc. connects hundreds of millions of people around the world every day, empowering them to explore new opportunities and innovate together. eBay Inc. does this by providing the Internet platforms of choice for global commerce, payments and communications. Since its inception, eBay Inc. has expanded to include some of the strongest brands in the world, including eBay, PayPal, Skype, StubHub, Shopping.com, and others. eBay Inc. is headquartered in San Jose, California.

Update 1/22/09: You can find the eBay Inc. Q4 2008 Earnings Call Transcript on SeekingAlpha.com.