Oct. 15 (Bloomberg) -- EBay Inc., the world's biggest Internet auctioneer, projected its first quarterly sales decline and reduced its annual earnings forecast as growth slows at the company's namesake Web sites.

EBay forecast fourth-quarter revenue of $2.02 billion to $2.17 billion, compared with $2.18 billion a year earlier. The value of goods sold on EBay's sites fell 1 percent in the third quarter, the first drop in the company's history, as international markets fell as much as the U.S.

The results are a blow to Chief Executive Officer John Donahoe, who in six months at the helm has made acquisitions to bolster secure payments unit PayPal, overhauled fees, enhanced protections and offered credit to boost listings amid heightened competition and stalling growth at its Internet marketplaces.

``EBay enjoys a global leadership position in e-commerce, but buyer and seller expectations have been rising and we've not kept up,'' Donahoe said today in a conference call with analysts after the announcement. EBay will boost spending on marketing in the fourth quarter to ``fight for our sellers'' in what they expect to be ``a tough holiday season,'' Donahoe said.

``It's a combination of the company's natural business model slowing down, partly because of increased competition,'' Douglas Anmuth, an analyst at Barclays Capital in New York, said today in a telephone interview. ``Then you have the macro environment. The numbers are certainly worse than I expected.''

EBay declined 63 cents, or 4.1 percent, in late Nasdaq trading after the results were released. Earlier, the stock fell $2.41, or 14 percent, to $15.33 in Nasdaq Stock Market composite trading. The shares have dropped 54 percent this year.

PayPal, Classifieds

San Jose, California-based EBay reported net income of $492 million, or 38 cents a share in the third quarter, compared with a loss of $935.6 million, or 69 cents, a year ago, when results were hit by a writedown in the value of its Skype Internet telephone unit.

Revenue rose to $2.12 billion, from $1.89 billion, helped by growth in its PayPal Internet payments unit and global classified advertising. Earnings excluding some items of 46 cents a share beat the 41-cent average estimate of 25 analysts surveyed by Bloomberg.

Excluding some items, EBay forecast 2008 profit of $1.69 to $1.71 a share, compared with its July prediction of $1.72 to $1.77. Revenue will be $8.52 billion to $8.68 billion, compared with the $8.8 billion to $9.05 billion the company forecast in July.

The average estimate of 25 analysts surveyed by Bloomberg is for annual earnings of $1.73 a share on sales of $8.93 billion.

Fourth Quarter

The company projected fourth-quarter profit, excluding items, of 39 cents to 41 cents a share, compared with an average analyst estimate of 47 cents. Twenty-one analysts estimate sales of $2.42 billion in the quarter.

Gross merchandise volume, or GMV, the value of all goods that users sold on EBay's sites, fell 1 percent.

Gross merchandise volume in the U.S. dropped 2 percent to $6.6 billion, and was ``flat'' overseas at $7.7 billion, Chief Financial Officer Robert Swan said today in a telephone interview. When currency fluctuations are extracted, international GMV slid 2 percent, he said.

``Clearly, GMV in the third quarter was not what we would have liked,'' Donahoe said. ``But we remain confident in our overall direction and believe we are on the right path.''

Online sales slowed sharply from mid-August, Chief Financial Officer Robert Swan said on the call. The ``weak trends'' have continued into October, he said.

Marketplace Listings

EBay's marketplaces revenue rose 4 percent to $1.38 billion in the third quarter. New marketplace listings climbed 26 percent from a year earlier, the fourth consecutive quarterly increase, EBay said.

The average selling price on EBay's Web sites fell 7 percent, as consumers globally were squeezed by higher fuel and food prices, job losses and the worst financial crisis since the Great Depression. They are buying ``fewer large ticket items,'' Donahoe said today.

Revenue from Skype, which added 32 million users in the quarter, climbed 46 percent to $143 million.

Donahoe inherited about 15,500 employees when he took over from predecessor Meg Whitman in April, almost double the 8,100 at the start of 2005, after acquisitions including automobile trading sites in Europe, Skype, online ticket-reseller StubHub and Web recommendation site StumbleUpon.

One thousand full-time employees and about 600 temporary and part-time workers will be fired by the end of this year, EBay said Oct. 6. The job cuts will cost EBay $70 million to $80 million pretax, most of which will be recorded in the fourth quarter, and lead to annual savings of about $150 million.

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

Last Updated: October 15, 2008 19:56 EDT