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 Ebay, which on Tuesday forecast lower-than-expected earnings this
quarter, also plans to ramp up its marketing spending on PayPal,
which is an Internet leader but faces stiff competition in the
fledgling smartphone payments market.
The company took a $3 billion non-cash tax charge in the first
quarter. The move will allow eBay to boost its available U.S. cash
by about $6 billion, when needed.
It ended the first quarter with cash, cash equivalents and nonequity
investments of $11.9 billion, though just $2.2 billion of that is in
the United States.
"If you look at our last 15 acquisitions, my guess is 10 have been
inside the U.S., maybe 11," Chief Executive John Donahoe said in an
interview. "Just looking at that versus where our cash is located,
you just say, alright it would make more sense to have more cash in
the U.S. for M&A."
Shares of eBay fell about 4 percent to about $52.25 in after-hours
trading despite posting a higher-than-expected first-quarter profit.
Ebay's second-quarter profit outlook fell short of analyst
estimates.
During the first quarter, eBay repurchased 33.1 million common
shares for about $1.8 billion as part of its previously announced $5
billion share buyback program.
The quarterly scorecard came a few weeks after activist investor
Carl Icahn dropped his campaign to force eBay to spin out its most
attractive division, PayPal.
Icahn's push to carve off PayPal emerged in January, but he backed
down after his efforts failed to gain the support of eBay investors.
Donahoe said Icahn's campaign did not shape eBay's decision to
repatriate foreign earnings to fund U.S. growth.
The reality is we're seeing growing opportunities in the U.S.,"
Chief Financial Officer Bob Swan said during a call with analysts.
"Additionally, we are an acquisitive company and we need to ensure
we have the resources available to capitalize on targets that become
available both domestically and abroad."
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"ACTION AND ACTIVITY"
EBay declined to say how it would use the extra cash in the United
States, but Donahoe said eBay's approach to acquisitions would be
consistent with years past. He pointed to last year's acquisition of
payment gateway Braintree as an example of how eBay would build on
its businesses such as PayPal.
PayPal has been a key driver of eBay's share value, as the company
vies with larger rival Amazon.com Inc, and analysts expect the unit
to remain a fast-growing business as it expands into offline
payments.
"If you look at what is happening in the world of commerce and
payments, there is a lot of action and a lot of activity," Donahoe
said during a conference call. "And so we continuously assess
opportunities to where we think it will be strategically and
financially valuable to extend our platforms."
The company earned 70 cents per share during the quarter, better
than the average analyst estimate of 67 cents per share, according
to Thomson Reuters I/B/E/S. But eBay forecast a second-quarter
profit between 67 cents and 69 cents, less than the 70 cents per
share expected by Wall Street.
Some investors were expecting an even larger first-quarter beat
after Carl Icahn ended his campaign to force eBay to spin out PayPal
earlier this month, Wedbush Securities analyst Gil Luria said.
EBay's revenue rose a slightly better-than-expected 14 percent to
$4.26 billion. PayPal, eBay's fastest-growing division, posted a
nearly one-fifth increase in revenue.
"Investors assumed that's because the results were very good and Mr.
Icahn was content with what he was seeing," Luria said.
"Expectations were very high going into the quarter," he said. "The
results were good, but not as good as some expected."
(Reporting by Deepa Seetharaman; editing by Bernard Orr)
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