eBay Inc. Announces Fourth Quarter and Full Year 2006 Financial Results.

Reports Record Q4 Net Revenues of $1.7 Billion

Delivers Q4 GAAP Diluted EPS of $0.25 and Non-GAAP Diluted EPS of $0.31

Repurchases $1.0 Billion of Common Stock During Q4 and Expands Program for Additional $2.0 Billion

SAN JOSE, Calif. -- eBay Inc. (Nasdaq:EBAY)(www.ebay.com) reported financial results for its fourth quarter and full year ended December 31, 2006.

eBay reported record consolidated Q4-06 net revenues of $1.7 billion, representing a growth rate of 29% year over year. GAAP operating income was $450 million, an increase of 21% year over year, and represented 26% of net revenues. Excluding stock-based compensation, operating income increased 33% year over year to $525 million, or 30% of net revenues. Non-GAAP operating income in Q4-06 was $575 million, representing a 33.4% operating margin and a 28% year-over-year increase.

GAAP net income in Q4-06 was $346 million, or $0.25 earnings per diluted share, an increase of 24% year over year. Excluding stock-based compensation, (net of tax effects), net income increased 35% year over year to $397 million, or $0.28 earnings per diluted share. Non-GAAP net income in Q4-06 was $431 million, or $0.31 earnings per diluted share, a 27% year-over-year increase.

For the full year, eBay generated consolidated net revenues of $6.0 billion, a 31% increase over the $4.6 billion generated in 2005. Consolidated net income increased 4% year over year to $1.1 billion, or $0.79 earnings per diluted share. Non-GAAP net income in 2006 was $1.5 billion, or $1.05 earnings per diluted share, a 24% year-over-year increase.

The company repurchased approximately 31 million shares of its common stock at a total cost of approximately $1.0 billion during the quarter, for a cumulative total cost of approximately $1.7 billion since the program was announced in July 2006. The company may purchase up to an additional $300 million of the company's common stock under this stock repurchase program. In addition, the company's board of directors has authorized an expansion of the stock repurchase program to provide for the repurchase of up to an additional $2.0 billion of the company's common stock within the next two years.

"Q4 was an excellent quarter for eBay, bringing 2006 to a very good close," said Meg Whitman, President and CEO of eBay Inc. "All three of the company's business units delivered impressive results this quarter, including record net revenues from our Marketplaces business, strong total payment volume on PayPal, and a triple-digit increase in the number of Skype users."

Q4 Business Unit Discussion

Marketplaces

Our Marketplaces business had a very strong quarter, driven by good conversion rates and increasing average selling prices or ASPs, benefiting from a robust online holiday shopping season in our key markets. We also enjoyed healthy growth from our non-GMV driven businesses, including Shopping.com and our Classifieds portfolio.

Marketplaces net revenues totaled a record $1.2 billion in Q4-06, a growth rate of 24% over the $1.0 billion reported in Q4-05. The eBay platform confirmed registered user base at the end of Q4-06 totaled 222 million, representing a 23% increase over the 181 million registered users reported at the end of Q4-05.

eBay's users generated a total of 610 million listings in Q4-06, 12% higher than the 546 million listings reported in Q4-05. These listings helped drive eBay Gross Merchandise Volume (GMV), the total value of all successfully closed items on the eBay trading platforms, to $14.4 billion in Q4-06, representing a 20% year-over-year increase from the $12.0 billion reported in Q4-05.

Payments

PayPal had an excellent fourth quarter. PayPal's on-eBay business benefited from strong eBay GMV growth and increased global penetration, while PayPal's Merchant Services business posted another quarter of remarkable growth, aided by further penetration of top online merchants around the world.

PayPal net revenues totaled $417 million in Q4-06, a growth rate of 37% over the $304 million reported in Q4-05. PayPal had 133 million total accounts at the end of Q4-06, a 38% increase from the 96 million reported in Q4-05. Those accounts helped drive record Total Payment Volume (TPV) of $11.0 billion in Q4-06, a 36% increase from the $8.1 billion reported in Q4-05.

PayPal Merchant Services contributed a record $3.9 billion to the $11.0 billion in global TPV in Q4-06, representing a 57% increase from the $2.5 billion reported in Q4-05.

Communications

Skype continued its impressive trajectory, posting remarkable user growth while making great strides in product innovation.

Skype net revenues totaled $66 million in Q4-06, a growth rate of 164% over the $25 million reported in Q4-05. The Q4-05 revenue amount represented the operations of Skype from the acquisition date of October 14, 2005 through the end of Q4-05.

Skype had 171 million registered users at the end of Q4-06, representing a 129% increase from the 75 million users at the end of Q4-05.

Other selected financial results

Operating Margin -- GAAP operating margin decreased to 26% in Q4-06, down from 28% in Q4-05. Excluding stock-based compensation, operating margin was 30%, consistent with Q4-05. Non-GAAP operating margin decreased to 33.4% in Q4-06, from 33.7% in Q4-05. The year-over-year decrease in non-GAAP operating margin is the result of a decrease in our gross margin, driven by business mix coming from our lower gross margin businesses, PayPal and Skype, and investment in site operations capacity across our businesses, offset by more efficient spending in Sales & Marketing and Product Development.

Tax Rate -- The GAAP effective tax rate for Q4-06 was 28%, which was a decrease from 29% for Q4-05. The non-GAAP effective tax rate in Q4-06 was 29%, which was an increase from 28% for Q4-05. The GAAP effective tax rate for FY-06 was 27%, which was a decrease from 30% from FY-05. The non-GAAP effective tax rate in FY-06 was 28%, which was a decrease from 30% in FY-05. Lower tax rates in 2006 resulted primarily from expansion of our international businesses and from changes in our operations in international markets.

Cash Flows -- GAAP operating cash flows increased 19% year over year to $626 million in Q4-06. Free cash flows, representing operating cash flows less net purchases of property and equipment of $97 million, increased 24% year over year to $529 million.

Cash, Cash Equivalents, and Investments -- The company's cash, cash equivalents, and investments totaled approximately $3.5 billion at the end of Q4-06.

"Overall, Q4 was a great quarter, with strong results across all of our businesses," said Bob Swan, Chief Financial Officer. "The $1 billion share repurchase we executed this quarter, in addition to expanding the program for another $2 billion, further underscores our confidence in the long-term outlook of the business."

Business Outlook

First Quarter 2007 -- eBay expects consolidated net revenues for Q1 2007 to be in the range of $1.670 billion to $1.720 billion. Non-GAAP earnings per diluted share for Q1 2007 are expected to be in the range of $0.28 to $0.30. These amounts assume a US dollar to Euro exchange rate of $1.25.

Full Year 2007 -- eBay expects consolidated net revenues for 2007 to be in the range of $7.050 billion to $7.300 billion. Non-GAAP operating margin for 2007 is expected to be 33%. Non-GAAP earnings per diluted share for 2007 are expected to be in the range of $1.25 to $1.29. These amounts assume a US dollar to Euro exchange rate of $1.25.

Quarterly Conference Call

eBay will host a conference call to discuss fourth quarter results at 2 p.m. Pacific Time today. A live webcast of the conference call, together with supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, can be accessed through the company's Investor Relations website at http://investor.ebay.com. In addition, an archive of the webcast will be accessible through the same link.

About eBay Inc.

Founded in 1995, eBay pioneers communities built on commerce, sustained by trust, and inspired by opportunity. eBay enables ecommerce on a local, national and international basis with an array of websites -- including the eBay Marketplaces, PayPal, Skype, Kijiji, Rent.com and Shopping.com -- that bring together millions of buyers and sellers every day.

Non-GAAP Measures

This press release includes the following financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission: non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating income, non-GAAP operating margin, non-GAAP effective tax rate, and free cash flows as well as GAAP amounts excluding the impact of stock-based compensation and the corresponding percentages of net revenues. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. See "Non-GAAP Measures of Financial Performance," "Reconciliation of GAAP to Non-GAAP Operating Income," "Reconciliation of GAAP to Non-GAAP Net Income," "Reconciliation of GAAP to Non-GAAP Effective Tax Rate," "Reconciliation of Operating Cash Flow to Free Cash Flow" and "Business Outlook" included in this press release for further information regarding these non-GAAP financial measures, including a reconciliation of these measures to the nearest comparable GAAP measures.

Forward-Looking Statements

This press release contains forward-looking statements relating to the future performance of eBay and its consolidated subsidiaries. These statements involve risks and uncertainties, and the company's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to: the company's need to increasingly achieve growth from its existing users as well as from new users in its more established markets; the company's ability to deal with the increasingly competitive ecommerce environment, including competition for its sellers from other trading sites and other means of selling, and competition for its buyers from other merchants, online and offline; the need to manage an increasingly large enterprise with a broad range of businesses of varying degrees of maturity and in many different geographies; the regulatory, patent, and competitive risks specific to Skype; the competitive, regulatory, credit card association, and other risks specific to PayPal, especially as it continues to expand geographically; the company's need to manage other regulatory, tax, and litigation risks as its product offerings expand and its services are offered in more jurisdictions; the company's ability to upgrade and develop its systems, infrastructure and customer service capabilities to accommodate growth at a reasonable cost; the company's ability to maintain site stability and performance on all of its sites while adding new products and features in a timely fashion; fluctuations in foreign exchange rates; the company's ability to profitably expand its model to new types of merchandise and sellers; assumptions and methods used to value and expense stock options provided to employees; and, the company's ability to profitably integrate, manage and grow recent and future acquisitions and other transactions. The forward looking statements in this release do not include the potential impact of any acquisitions that may be announced and/or completed after the date hereof.

More information about factors that could affect the company's operating results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company's investor relations website at investor.ebay.com or the SEC's website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to the company on the date hereof. eBay assumes no obligation to update such statements.

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