Thursday, April 19, 2007

EBay Needs More

Ebay (NASDAQGS:EBAY) released a pretty good spin on their numbers. Not a bad start but the skeptical hairs on the back of my neck were quivering somewhat. Much of the good results are attributable to improved tax rates (a decrease of 5%) and favorable FX rates. You take it anyway you can get it but these two factors can turn on a dime and bite your financial backside without notice.

Ebay announced they had spent approximately $331 million on stock repurchases and are standing with another $2 billion. Big statement but it just amounts to short term tricks. The $331 million repurchase represents 59% of net cash flow from operations. This ratio cannot stand without long term negative consequences.

The $2 billion threat represents some 60% of their current cash and marketable securities. This threat also cannot stand.

Management needs to continue fixing the problems and taking the stock upwards. These statements are showing a lack of focus on operations and a fixation on financial tricks.