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eBay Shows Sharply Higher Q4 Profit
PALO ALTO — Online auction site eBay Inc. Tuesday reported sharp growth in its fourth quarter sales and profits and set a 3-for-1 split of its high- flying stock.

The company reported a "supplemental" net income, excluding various expenses, of $2.8 million, or seven cents per diluted share, compared with $214,000, or one cent per share, in the year-ago period. Revenues rose to $19.5 million from $2.6 million the year before.

eBay shares, which had closed regular trading up $3.38 to $20.88, surged to as high as $236 in aftermarket activity following the release of earnings. The stock has traded as high as $321 since the company went public at $18 a share four months ago.

eBay said the sharply higher results mainly reflected increased activity on its site. During the fourth quarter, it said it hosted 13.6 million auctions of everything from guns to Beanie Babies, up from 9.2 million auctions in the third quarter. The number of eBay registered users topped 2.1 million at the end of December, up from 1.2 million just three months earlier.

Because the company brings buyers and sellers together but does not actually handle merchandise, its overhead is relatively low and a large portion of its sales gains translate directly into higher profits.

Still, eBay said its expenses did rise sharply during the quarter due to increased spending on customer support personnel, depreciation of equipment and other transactional expenses like bank processing charges for customer fees paid by credit cards.

eBay's expenses for sales and marketing, product development and general and administrative purposes rose to $14.4 million from $2.0 million in the year-ago quarter. The company has recently invested in features that will prevent fraud on its site.

Despite the higher spending, the results were well received on Wall Street, where analysts focused mainly on the "top line" or revenue growth, and said the expenditures made now would help fuel growth over time.

"It was a great quarter," said Goldman Sachs analyst Rakesh Sood. He said while expenses were somewhat higher than he expected, sales also surpassed expectations. "Given the strong surge in revenues, expenses were reasonable," he said.

eBay's net income, including all extraordinary expenses, totaled $1.5 million, or four cents a share, compared with $189,000 or one cent last year.

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