Three Key Takeaways From eBay Inc (EBAY)’s Earnings

This is how to use offshore cash
You may be familiar with the conundrum that many American multinationals face as they accumulate cash from operations overseas. Cash earned in foreign jurisdictions often idles in foreign bank accounts, as companies are reluctant to pay U.S. taxes on those earnings when the dollars are brought back home. That’s the reason Apple Inc. (NASDAQ:AAPL) famously elected to issue bonds to pay for dividends and stock buybacks earlier this year rather than use the colossal reserves of cash it holds in other countries. eBay Inc (NASDAQ:EBAY) has a rather clever way of insuring that its own foreign cash reserves don’t sit uselessly while earning measly short-term money market rates: It uses its offshore cash to fund the international growth of Bill Me Later. The Bill Me Later loan portfolio showed a balance of $2.4 billion at the end of the last quarter. According to eBay, 65% of these loan receivables were funded with offshore cash– a good example of how the company is using its capital quite efficiently.

Looking forward to the second half of 2013
If you’re invested in eBay Inc (NASDAQ:EBAY), don’t let the near-term weakness in the stock undermine your confidence: Stay the course. The company has a simple but effective strategy to grow its revenues globally through increased transaction processing. Its revenue growth and profit margins continue to impress, and the company has a diversified suite of services available to widen its transaction volume. Check in on the ECV growth and take rate every quarter, and keep an eye on those loan loss provisions.

Fool contributor Asit Sharma has no position in any stocks mentioned. The Motley Fool recommends Apple, eBay, and Visa and owns shares of Apple and eBay.

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