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EBay's Earnings Put Internet Sector Under Spotlight

EBay is one of the net's four horsemen, ushering in a spate of online earnings after the bell today, and coming a week ahead of Yahoo (next Tuesday); Amazon (next Wednesday); and Google (next Thursday.) So eBay's earnings will put the entire Internet tech sector under the spotlight.

Analysts today are looking for eBay to post 41 cents a share on $2.14 billion in revenue. EBay's own range was 39 to 41 cents on between $2.1 billion to $2.15 billion, and many analysts I'm talking to are right at consensus. eBay had already announced it would take a $1.43 billion charge related to the Skype acquisition, an admission by the company it paid way too much ($2.6 billion) when it did the deal in 2005.

Key stuff to watch for today, say analysts on the Street: If eBay misses on the top, posting fourth quarter revenue less than $2.14 billion, that would be bad; greater than $2.17 billion would be good. EPS guidance for all of 2008: If eBay guides to a mid-point of $1.65 or greater, that would be good; less than $1.60 would be perceived as a negative.

Organic U.S. gross merchandise volume, or GMV, last quarter was 7 percent. IT needs to show signs of growth for the Street to feel comfortable that eBay's U.S. business is still performing well. And keep an eye on total listings: more than 650 million would be considered good, less than 630 million could be bad, and anything in between would be considered "ambiguous."

Margins and guidance will also be key. Citigroup's Mark Mahaney says he expects very conservative guidance, at or below Street estimates for all of 2008. He says there are a few headwinds facing the company, including a new fee structure that will cut margins, and a new focus on lower-margin businesses. The reduction in upfront, or listing fees, will be watched very closely, and the company will offer up new details about that plan after the close. He's expecting a modest beat and lower guidance.

He says there are two scenarios that would make him a buyer of eBay shares: "First is that the PayPal business which seems to be the most bullet-proof part of the business, continues to maintain or gain market share in online payments. And secondly, these experiments they're doing with their marketplace business, if that can re-accelerate their core marketplace business through listing fees cuts and improvements to the product, if they can do that, there's a dramatic opportunity for these shares to outperform."

But that's a big "if," especially as recession worries dog so many of the top players in tech. Still, even with recession woes, some analysts believe that eBay is positioned better than most; that the perceived "deals" it offers online, and various economic stimulus packages including the Fed's interest rate cut yesterday, could spur consumer spending and that could be good for eBay this year.

Other eBay issues to consider: Lots was made about the company's Skype partnership with Sony and its Playstation Portable device. But just today, Sony says plans to introduce Skype on the PSP in Japan have now been delayed. Also, rumors began swirling late last week that CEO Meg Whitman was ready to announce her retirement and that news on that front could be coming in several weeks. I have heard the announcement could come much, much sooner than that.

Plenty of targets above $40 a share for eBay, and that's not bad for a company down 16 percent on the quarter and trading at around $27. Seems like there's a lot of wiggle room for some good news from this company. Investors will be looking for anything they can from eBay that'll help predict what's coming next week from Yahoo, Amazon and Google.

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