eBay (EBAY) has lots of cash and a very strong brand name. The company says it has also been trying to curb all their counterfeit problems. Hmm, really? In my opinion eBay (EBAY) is doing next to nothing to curb the sale of counterfeit items on its site. As many know, eBay is awash with counterfeit items sold by some of eBay’s largest sellers, plus their businesses continue to grow unchecked. I venture to say that getting rid of the counterfeiters would result in eBay cutting a great deal of its own revenue, and I am not convinced that is something eBay is prepared to do. Even if they have to fight the occasional counterfeiting lawsuit it costs them a lot less.
The eBay investors are continually misled by the BOD into believing that they still have good upward potential even though the markets suggest otherwise. Then there is that $7.8B in Goodwill and other intangibles on eBay’s Balance Sheet! And when pointed out for those who don’t know how to read financial statements it means that removal of such will reduce S/H Equity by 70% to a Net Book Value of just $2.59 per share. And $2.59 is less than 25% of current market price. So I pose the question are eBay shares likely to rise significantly in price anytime soon? I really don’t think so. I think some major changes need to be made. And those changes must include replacement of eBay’s current management under Donahoe, and among other things, a change from feedback 2.0 back to the old system, along with a renewed emphasis on “true” auctions which were really what made eBay…eBay, setting it apart from just another online mall. eBay (EBAY) also owns Skype + Paypal and those synergies are doing rather well. Lets just see if eBay realizes what they truly have, or just sells the properties to someone else who can realize their potential. If they sell the properties it will mark a desperate sign for the once dominate internet company.
Take out the goodwill, the intangible assets, and $3 billion of the excess cash and you get a company that employs about $6 billion in assets and can earn about $1.84 billion this year. That’s a company that earns 30% on its assets. How many companies have that kind of business model? How many companies have the management that can match that kind of return on assets? Their capital expenditures are only half a billion. So they would turn their capital base over every 12 years while earning 30% per year on those assets. WOW!