enefiting from an aggressive campaign to position itself as a place to buy Christmas gifts, eBay posted sharply higher sales and profits in the fourth quarter of last year.

EBay has long been the fastest growing and most profitable of the major Internet companies. During the last year, it has started to increase its revenue growth rate, which is unusual for a company its size.

This acceleration is a result of eBay's expansion into new merchandise categories, like automobiles, and stepped-up marketing efforts.

Advertisement

For the holiday season, eBay spent $14 million on its first major television ad campaign, and the company worked with its many sellers to market goods aimed at gift buyers. For example, eBay identified 20 toys that might be in short supply and promoted them. One item, Hasbro's FurReal Friends robot cat, attracted 6,000 auctions in early December.

EBay created another area for sellers of electronics to offer goods with free shipping.

"We repositioned eBay as a holiday shopping destination for the first time," said Meg Whitman, eBay's chief executive. "Our TV ads are bringing in new users and telling them to check eBay first before you buy anything."

EBay reported a profit of $87 million for the fourth quarter, more than triple the $25.9 million it posted a year earlier. That comes to 28 cents a share, surpassing the 24 cents analysts had expected.

EBay reported its results after the markets closed. In regular trading, shares of eBay fell $2.25, to $71.25, but in after-hours trading they rose as high as $71.65.

Revenue was $413.9 million in the quarter, up 89 percent from a year earlier. The recent quarter included $72.6 million in revenue from PayPal, the online credit card payment company that eBay bought in October. Excluding that revenue, the company's revenue grew 56 percent.

Revenue from auctions in the United States was $211 million, up 58 percent. International auction revenue was $107 million, up 173 percent.

Revenue from online advertising, sold through an arrangement with America Online, plummeted to $7 million, from $27 million a year earlier. EBay says that with the slow market for online advertising, this is not an area it is focusing on.

For the full year, eBay earned $249.9 million, up from $90.4 million a year ago. Sales increased 62 percent, to $1.21 billion.

Yesterday, eBay raised its projections, predicting 2003 revenue of $1.9 billion and earnings per share of $1.12. Those numbers implied that its already high profit margins will continue to increase.

Last year, a total of $14.9 billion worth of merchandise was sold on eBay. That is just shy of the $15.5 billion in sales analysts expect this year for Federated Department stores, the parent of Macy's.

EBay is continuing to attempt to attract big businesses as sellers and offer goods at fixed prices in addition to auctions. That puts it in more direct competition with Amazon, which is trying to offer the goods of other retailers alongside its own.

Rajiv Dutta, eBay's chief financial officer, said it would continue to serve separate markets, even for gifts. "Amazon is for full-price current-season merchandise," he said. "We are where you find scarce new items, like FurReal Friends, or get great prices on last year's 2.1 megapixel digital cameras."