EBay Inc. (EBAY) announcing a new website and joint venture with the Beijing-based Internet company, TOM Online Inc. Ebay’s new strategy differs from comments made by CEO Meg Whitman last year, when she described a $100M investment eBay was making in China at the time as “a sign of an unmistakable commitment and an unstoppable determination to be number one in China.”
An audio podcast of this article is available: poweropt.com/podcasts/2006_12_21_ebay.mp3.
EBay and TOM Online, a wireless Internet company, will launch a new auction site next year for Chinese consumers to buy and sell second-hand goods at fixed and auction-determined prices. When the venture rolls out, users navigating to ebay.cn, eBay’s auction site in China, users will be automatically transferred to the new website.
Analysts and company executives have projected large revenues for eBay’s growth in China. The growth has not materialized as expected. Ebay will own 49 percent of the new company and TOM Online will hold 51 percent. Ebay will contribute $40 million to the deal.
Whitman stated in an AP interview, “You have to remember that we’re pioneering a whole new business here. We have quite a substantial business here, but what we’ve learned is that to operate successfully in China you need a strong local partner.” She went on to say, “Asia is very different from western Europe and the United States, no question. In every country, we have a tailored strategy, and I will tell you that China needs an even more tailored strategy.”
Ebay no longer operates in Japan after being beaten out there by a joint venture between Yahoo (YHOO) and Softbank Corp, a Tokyo investment firm. Ebay is trying to avoid a replay of this in China.
eBay, Inc. and its subsidiaries provide online marketplaces for the sale of goods and services and online payment to individuals and company’s in the United States and internationally. The company has three segments: its online marketplace, payment division (largely PayPal), and communications. Rent.com and Shopping.com are two examples of eBay companies other than the familiar auction site. The Payment division allows companies and individuals to conduct financial transactions online. The Communications segment primarily contains the recently acquired online communications company Skype. eBay, Inc. was founded by Pierre M. Omidyar as a shortened version of “echo Bay” in 1995 and is headquartered in San Jose, California.
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|Covered Call eBay Inc. (EBAY) $31.66|
|XBAAF||07 JAN 30.00||$2.20||6.90%||1.80%||1.80%|
|XBAAZ||07 JAN 32.5||$0.80||2.50%||2.60%||5.30%|
The first eBay covered calls stock options position is an in-the-money [ITM] trade offering healthy +6.9% downside protection and +1.8% potential profit and the potential profit can be realized in only 30 days.
The second covered calls stock options trade is an out-of-the-money [OTM] trade giving the trader +2.5% downside protection with a potential profit of +2.6% if the stock remains unchanged. The potential profit for the second covered calls position rises to +5.3% as the stock approaches the $32.50 strike price. If the stock lands above $32.50, the maximum potential profit of +5.3% is realized.
The ITM/OTM trade-off for eBay’s return versus downside protection illustrates the beauty of covered calls stock options investing, as it allows investors to tailor their positions according to their own individual risk/reward profile.
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