Sotheby’s reported operating revenues for the third quarter, ended Sept. 30, decreased 11 percent to $76 million. The auction house said the $9.1 million decline is largely due to a higher level of principal losses on auction guarantees, as well as lower private sale commissions and lower auction commission margins.

Approximately $42 million of the guarantee losses relate to property offered in recent fourth quarter auction sales, as well as estimated losses related to guaranteed property to be offered in upcoming Contemporary Art sales in New York, the New York-based company said.

Revenues in the quarter benefited from a $39.9 million, or 70 percent, increase in auction commission revenues in the quarter due to the change in timing of Sotheby’s summer Contemporary Art sales in London from the second quarter of 2007 to the third quarter of 2008, as well as the Damien Hirst sale, Beautiful Inside My Head Forever, in London in September, the company said.

The company’s net loss for the third quarter of 2008 was $46.2 million, compared to a net loss of $20.9 million prior period, a $25.3 million decline.

Because of the seasonal nature of the art auction market, auction sales in the third quarter have historically represented only about 7 to 10 percent of annual auctions sales, and the third quarter has historically been a loss period for the company. As a result, third quarter results are typically not indicative of expected full year results.

For the first nine months of 2008, consolidated sales (aggregate auction sales, private sales, and dealer revenues) were a record $4.1 billion, up 7 percent from the prior period. Operating revenues in the period were $525.4 million, a $46.6 million, or 8 percent, decline from the prior period largely due to a higher level of principal activities losses, lower private sale commissions, and lower auction commission margins.

Net income for the first nine months of 2008 was $36.7 million, a $74 million decline from the comparable period of 2007. Impacting the comparison of the nine month results to the prior years are higher levels of dealer inventory writedowns, sale promotion costs, general, and administrative expenses and borrowing costs, the company said.

“At this period of worldwide economic turmoil, we are very pleased to note that our liquidity is very strong and that our auction commission margins held steady at 15 percent in the quarter,” said Bill Ruprecht, president and chief executive officer of Sotheby’s. “It is hardly surprising, however, that our business is not immune from the unprecedented global economic turbulence which has impacted so many other businesses. Our auctions this autumn were assembled over the summer when the world was a very different place and predictably we are now seeing a softening in a number of markets, particularly where there has been a big price appreciation.”

He continued, “We are very prudently positioned going forward. Through reducing guarantee activities, resizing our organization and receiving a level of return from consignors which reflect our services, it is both our expectation and our goal that we will be meaningfully profitable at significantly lower sales levels even during these uncertain times.”

On Nov. 19 in Geneva, the auction of Magnificent Jewels will include the famous emerald cut Lesotho I (with a published estimate of $3 to 5 million) which weighs 71.73 cts. and was cut by Harry Winston from a 601-ct. rough cut diamond. This is the first time the stone has appeared at auction since it was purchased from Harry Winston in the 1960s by the present owner.

Another highlight of the sale is a flawless fancy deep blue 10.48-ct. briolette diamond which has an estimate of $6 to $9 million. The entire sale has a published has an estimate of $43 to 64 million.

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