18/4/2007 - Ebay Shares have dropped in value more than 50%

Meg Whitman says Google will not impact its PayPal business

Internet auction firm eBay is to start its first ever buyback scheme of up to $2bn shares over two years.

Ebay shares, which rose 5% on the news, have shed 41% of their value this year amid stiff competition.

The firm is also planning on raising the fees retailers operating on its site pay, to counter slower growth.

The announcement came as the firm announced second quarter profits had fallen by 14% to $250m ($135m) from last year's £291.6m.

'Could be stronger'

The quarterly profits were however in line with expectations as was revenue, which rose by 30% to $1.41bn.

"We were stronger in Pay-Pal and Skype and Shopping.com and had slightly slower growth rates in our core [auction] business," said Meg Whitman, chief executive of eBay.

But she added "we think it could be stronger".

The latest earnings show the online payments business PayPal, saw customers increase by 44% compared to a year ago and generated $330.7m - a rise of 39% on last year's second quarter.

However, eBay is facing growing competition from web search giant Google which recently launched its own online payments firm.

Ms Whitman said the firm was not concerned about Google impacting Paypal's performance, adding "we are gong to innovate as we always have."

While stocks were boosted by the news of the $2bn buy-back plan scheme the figure is tiny when seen in the light of the $40bn that has been wiped off the value of eBay's shares in the past 18 months.

The decision to increase rates is another way to bolster the firm's health.

The move to up rates for retailers operating online stores on eBay could affect 541,000 stores worldwide and will raise fees by an average 6%, the firm estimated.