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EBay 2Q profit rises on PayPal growth; eBay e-commerce unit hampered by cyberattack

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NEW YORK, N.Y. - EBay said Wednesday that its second-quarter net income rose 6 per cent, as strong growth from its PayPal payments business offset lower-than-expected revenue that was hampered by a global password reset after a cyberattack.

Investors had been expecting muted results and shares rose slightly in aftermarket trading, even though the company lowered its sales guidance for the year.

PayPal, which eBay bought for $1.3 billion in late 2002, gained 4 million new active registered accounts to end the quarter up 15 per cent to 152 million.

The business is growing faster than the company's e-commerce site: Payments revenue rose 20 per cent to $1.95 billion, about 45 per cent of total revenue. Meanwhile, its core marketplaces revenue rose 9 per cent to $2.17 billion.

It was a tough quarter for eBay. In May, the company said a cyberattack compromised user passwords, email addresses and phone numbers, although no financial or credit card information was stolen. It asked all 145 million users to change their passwords.

A change in how Google runs its search engine during the quarter also made it harder for eBay results to come up during Web searches.

"We've got a couple of body blows in the second quarter with having to reset the passwords and the SEO change but we're continuing to invest in this business and we think that it's going to be one of the winners in e-commerce," said CEO John Donahoe in a call with analysts. SEO refers to search engine optimization, a technique companies use to appear more frequently online.

The San Jose, California-based company said net income increased to $676 million, or 53 cents per share, from $640 million, or 49 cents per share, in the same quarter a year ago.

Earnings, adjusted for one-time gains and costs, came to 69 cents per share. The average per-share estimate of analysts surveyed by Zacks Investment Research was for profit of 68 cents.

Overall revenue climbed 13 per cent to $4.37 billion from $3.88 billion in the same quarter a year ago, and missed Wall Street forecasts. Analysts expected $4.38 billion, according to Zacks.

For the current quarter, eBay expects adjusted net income of 65 cents to 67 cents per share on revenue of $4.3 billion to $4.4 billion. Analysts expect net income of 70 cents per share of on revenue of $4.42 billion, according to FactSet.

For the year, it expects adjusted per-share earnings of $2.95 to $3. Because of the problems in the second quarter, the company lowered its sales forecast for the year by $200 million, to $18 billion to $18.3 billion. Analysts expect $2.99 on revenue of $18.27 billion.

Shares added 66 cents, or 1.3 per cent, to $51.36 in aftermarket trading. They closed the day down 11 cents at $50.70.

EBay shares have fallen about 8 per cent since the beginning of the year, while the Standard & Poor's 500 index has risen 7.2 per cent. The stock has dropped $6.68, or 12 per cent, in the last 12 months.

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