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EBay tumbles after lackluster forecast for holiday shopping

[SEATTLE] EBay Inc is testing investor patience with a lackluster forecast for the holiday shopping season, while executives say it will take more time for their turnaround efforts to pay off.

The shares fell as much as 11 per cent on Thursday, the most since January, after EBay projected fourth-quarter revenue and profit that may miss analysts' estimates. Chief Executive Officer Devin Wenig said the company shifted its marketing to position EBay as a site for deals on popular brands instead of focusing on promotional subsidies that drive immediate results. That effort will need at least a year to take hold, Wenig said on a conference call with analysts.

"This will take time," Mr Wenig said. "The results are not a light switch." EBay's growth rate has been slowing while e-commerce leader Inc increases its market share. The company's gross merchandise volume - the value of all goods sold on the site - rose 5 percent in the third quarter when excluding the effects of currency exchange rates, compared with 6 per cent growth in the second quarter.

"The core marketplace business doesn't seem to have turned a corner as much as it could have," said Ron Josey, an analyst at JMP Securities.

EBay shares were trading at US$29.21 at 9.48 am in New York.

The company has a "structured data" initiative under way that seeks to make it easier for shoppers to find what they want among the 1 billion listings on the marketplace and for merchants to better identify opportunities for sales. The rebranding effort seeks to dislodge consumer perceptions of EBay as an online rummage sale and lure them to the site for deals on hot products.

Those investments and a solid second-quarter performance fueled investor optimism that EBay was poised for a strong holiday season, driving the stock up since July, said Josh Olson, analyst at Edward Jones & Co.

"We're in more of a waiting game and might miss out on this holiday shopping season," Mr Olson said. "It's a reality check to some overly optimistic expectations."