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Oct 19, 2000

eBay Inc. Releases Third Quarter 2000 Financial Results

Record Net Income of $15.2 Million - Doubling Sequentially
Online Revenues Year Over Year Growth of 108%
Record 2.9 Million New Users

SAN JOSE, Calif., Oct. 19 - eBay Inc. (Nasdaq: EBAY) (, the world's largest online trading community, today reported financial results for its third quarter ended September 30, 2000.

eBay reported consolidated net revenues of $113.4 million in the third quarter of 2000, a 93.8 percent increase over the $58.5 million reported for the same period last year. Consolidated net income for the quarter was $15.2 million, or $0.05 per share on a diluted basis. eBay's consolidated net income excluding the effects of certain non-cash and stock-related charges was $19.1 million, or $0.07 per diluted share, compared with $3 million, or $0.01 per diluted share during the third quarter of 1999.

"eBay delivered record revenues, profits, new users and commerce this quarter," said Meg Whitman, President and CEO of eBay. "These results underscore the long-term power of the platform and our global community."

Key financial and operating metrics:
    -- Online Net Revenues -- eBay's online net revenues reached
       $102.8 million, a 108 percent increase over the $49.5 million in the
       third quarter of 1999.
    -- Gross Merchandise Sales -- eBay users transacted a record $1.4 billion
       in gross merchandise sales (the value of goods traded on the eBay
       site), representing an 83 percent increase over the third quarter of
    -- Registered Users -- eBay expanded the number of registered users to
       18.9 million by quarter end, an increase of 146 percent from
       7.7 million on September 30, 1999.
    -- Reported Net Income -- eBay's reported net income reached
       $15.2 million, more than twelve times the $1.2 million in the third
       quarter of 1999.
    -- Auctions Hosted -- eBay hosted 68.5 million auctions during the third
       quarter, compared to 36.2 million during the same period last year.
       This represents year-over-year growth of 89 percent.
    -- Cash Flow -- eBay generated more than $33 million in cash from
       operations in the third quarter, increasing total cash and financial
       instruments to $877 million.
    -- Gross Margin -- Gross margin increased eight percentage points to
       79 percent this quarter from 71 percent in the third quarter of 1999.
Key execution highlights:
    -- Launched the eBay France site on October 4, 2000.
    -- Completed the acquisition of on July 11, 2000
    -- Increased Billpoint listings and transactions by 35 percent and 40
       percent, respectively, from July to September.
    -- Increased Automotive category listings to more than 71,000 representing
       a 40 percent growth over the prior quarter and formed strategic
       relationships with and CarFax.
    -- Launched the Real Estate category and announced a strategic
       relationship with
    -- Launched eight new local trading sites:  Baltimore, MD; Washington
       D.C.; Oakland, CA; San Jose, CA; Orange County, CA; Richmond, VA;
       Albany, NY; and Albuquerque-Santa Fe, NM.
    -- Announced a strategic alliance with UltimateBid for the trading of
       unique events and experiences.
    -- Listed and sold the first five Sun Blade 1000 workstations autographed
       by Scott McNealy. (
    -- Introduced the SellPhone service on that enables sellers to
       list items to the site with any telephone.
    -- Announced agreement with TradeOut, an Internet marketplace for surplus
       business assets that brings new buyers to eBay's Business Exchange.
    -- Rolled out Picture Services, an integrated "drag & drop" photo hosting
       service powered by IPIX for eBay users in all categories and on all
       country sites. (
    -- Brought fifteen government agencies to sell on eBay.
    -- Announced "Remains of the Games" on eBay Australia where fans worldwide
       can bid for official items from the Sydney 2000 Olympics.
    -- Announced Digital Opportunity Program for Seniors, an initiative
       designed to help senior citizens overcome the digital divide by
       providing easier access to technology and education.
Financial and operating summary:

The primary contributor to the quarter over quarter increase in the Company's net revenue was increased on-line revenue, primarily from strength in eBay's core business, early traction in new initiatives such as autos and international, and continued success in increasing monetization of the site. Net revenues from eBay's traditional off-line auction subsidiaries increased slightly from the prior quarter.

Gross margin improved as a percentage of revenue quarter on quarter due to the management of costs in customer support and site operations and increases in higher gross margin areas such as autos and end-to-end trading solutions. Sales and marketing increased on an absolute basis compared to the prior quarter but decreased slightly as a percentage of revenue. Product development cost increased due to an investment in engineering talent at both and eBay. General and administrative costs decreased due to efficiencies in personnel and outside professional service costs and to the recovery of legal expenses from a settlement of certain litigation.

For the third quarter, eBay recorded consolidated non-cash charges of $3.4 million related to stock-based compensation and approximately $0.9 million relating to acquired intangibles, payroll taxes on the exercise of employee stock options and one time merger-related expenses. eBay recorded a consolidated tax provision of $10.1 million representing an effective tax rate of 40 percent of third quarter consolidated pretax income.

The Company's overall balance sheet continued to improve during the third quarter of 2000 as consolidated assets increased by $25 million over the second quarter of 2000. The improvement resulted primarily from an increase of cash and investments driven by eBay's the more than $33 million positive cash flow from operations.

About eBay

eBay is the world's largest on-line trading community. Founded in 1995, eBay created a powerful marketplace for the sale of goods and services by a passionate community of individuals and businesses. On any given day, there are millions of items for sale on the site across thousands of categories. eBay enables trade on a local, national and international basis with local sites in 68 markets worldwide. and country specific sites in the United Kingdom, Canada, Germany, France, Japan and Australia. With the acquisition of in July 2000, eBay's community now benefits from a marketplace which includes traditional auction and fixed-price trading.

Forward Looking Statements

This announcement contains forward looking statements that involve risks and uncertainties, including those relating to the Company's ability to grow its business and user base. 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 manage both an increasingly broad range of businesses and significant growth, to deal with the increasingly competitive environment for online trading, to manage regulatory and litigation risks, to maintain site stability and to continue to expand its model outside of the U.S. More information about potential factors which could affect the Company's business and financial results is included in the Company's Form 10-K for the period ended December 31, 1999 and its 10-Qs for the periods ended March 31, 2000 and June 30, 2000 under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and under the heading "Risk Factors" in its Registration Statement on Form S-3 filed on September 19, 2000. All forward looking statements are based on information available to the Company on the date hereof, and the Company assumes no obligation to update such statements.
                                  eBAY INC.

                          (in thousands; unaudited)

                                                  December 31,  September 30,
                                                     1999           2000

    Current assets:
      Cash and cash equivalents                     $221,801       $130,558
      Short-term investments                         181,086        302,542
      Accounts receivable, net                        36,538         49,226
      Other current assets                            25,882         40,419
        Total current assets                         465,307        522,745

    Property and equipment, net                      112,202        122,054
    Long-term investments                            373,988        317,489
    Restricted cash and investments                       --        126,390
    Deferred tax asset                                 5,639         10,887
    Intangible and other assets, net                  12,689         14,581

                                                    $969,825     $1,114,146
    Current liabilities:
      Accounts payable                               $32,133        $18,796
      Accrued expenses and other current liabilities  32,675         60,862
      Deferred revenue and customer advances           5,997          5,170
      Debt and leases, current                        15,781          8,965
      Income taxes payable                             6,455          7,966
        Total current liabilities                     93,041        101,759

    Debt and leases, long-term                        15,023         22,887
    Other liabilities                                  5,900          5,881
    Minority interests                                 1,732         14,740
        Total liabilities                            115,696        145,267
    Total stockholders' equity                       854,129        968,879

                                                    $969,825     $1,114,146

                                  eBAY INC.

             (in thousands, except per share amounts; unaudited)

                            Three Months Ended         Nine Months Ended
                               September 30,               September 30,
                             1999         2000          1999         2000

    Net revenues           $58,525      $113,377     $150,805      $297,416
    Cost of net revenues    17,081        23,912       36,003        71,499
      Gross profit          41,444        89,465      114,802       225,917
    Operating expenses:
      Sales and marketing   27,278        41,137       67,152       117,713
      Product development    6,958        15,783       14,597        41,007
      General and
       administrative       11,914        17,341       29,616        54,872
      Payroll expense on
       employee stock options   --            17           --         1,752
      Amortization of
       acquired intangibles    328           264          983           879
      Merger related costs      --           607        4,359         1,431
        Total operating
         expenses           46,478        75,149      116,707       217,654
    Income (loss) from
     operations            (5,034)        14,316      (1,905)         8,263
    Interest and other
     income, net             7,078        11,036       13,392        32,981
    Income before income
     taxes                   2,044        25,352       11,487        41,244
    Provision for income
     taxes                   (858)      (10,141)      (5,720)      (16,815)
    Net income              $1,186       $15,211       $5,767       $24,429
    Net income per share:
      Basic                  $0.01         $0.06        $0.03         $0.10
      Diluted                $0.00         $0.05        $0.02         $0.09
    Weighted average shares
      Basic                227,975       255,741      212,488       249,070
      Diluted              276,179       280,297      271,476       280,567

    Supplemental (A)

    Historical income
     (loss) from
     operations           $(5,034)       $14,316     $(1,905)        $8,263
    Add back certain
     non-cash and merger
      Amortization of
       compensation          1,377         3,360        3,652         6,720
      Amortization of
       intangibles (B)         430           264        1,210           879
      Payroll expense
       on employee
       stock options            --            17           --         1,752
      Merger related costs      --           607        4,359         1,431
        Total add back       1,807         4,248        9,221        10,782
    Supplemental income
     (loss from operations
     excluding certain
     non-cash and merger
     and stock option
     related charges       (3,227)        18,564        7,316        19,045
    Interest and other
     income, net             7,078        11,036       13,392        32,981
    Supplemental provision
     for income taxes (C)    (858)      (10,496)      (7,551)      (18,503)
    Supplemental net
     income excluding
     certain non cash,
     merger and stock
     option related
     charges                $2,993       $19,104      $13,157       $33,523
    Supplemental net
     income per share,
     diluted                 $0.01         $0.07        $0.05         $0.12

    (A) The accompanying supplemental financial information is presented for
        informational purposes only and should not be considered as a
        substitute for the historical financial information presented in
        accordance with generally accepted accounting principles.
    (B) Expenses associated with the amortization of acquisition related
        charges may be included within cost of net revenues as well as
        operating expenses under the heading "amortization of acquired
    (C) Supplemental provision for income taxes includes a 42 percent tax
        effect for merger related costs in 1999 and a 42 percent tax effect
        for the first and second quarter in 2000 and a 40 percent tax effect
        for the third quarter in 2000 for the amortization of acquired
        intangibles, payroll expense on employee stock options and merger
        related costs.
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