Expedia 2005 Annual Report Download - page 20

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We rely on the performance of highly skilled personnel and, if we are unable to retain or motivate
key personnel or hire, retain and motivate qualified personnel, our business would be harmed.
Our performance is largely dependent on the talents and efforts of highly skilled individuals. Our
future success depends on our continuing ability to identify, hire, develop, motivate and retain highly
skilled personnel for all areas of our organization. In particular the contributions of Barry Diller, our
Chairman and Senior Executive, and Dara Khosrowshahi, our Chief Executive Officer, are critical to the
overall management of the company.
In addition, our future success will depend on the performance of our senior management and key
employees, many of whom joined Expedia recently. Expedia cannot ensure that it will be able to retain the
services of Mr. Diller, Mr. Khosrowshahi or any other member of our senior management or key
employees, the loss of whom could seriously harm our business. In addition, competition for well-qualified
employees in all aspects of our business, including software engineers and other technology professionals, is
intense. Our continued ability to compete effectively depends on our ability to attract new employees and
to retain and motivate our existing employees. If we do not succeed in attracting well-qualified employees
or retaining or motivating existing employees, our business would be adversely affected.
Many of our business units use separate operational and financial systems that have not been
integrated and that rely heavily on manual procedures.
Expedia is composed of multiple business units that were unaffiliated companies prior to being
acquired by IAC. These multiple business units use disparate systems, processes and personnel to support
operations, including bookings and fulfillment, accounting and budgeting, tax filings, vendor payments and
back office support. In addition, certain of the business units rely on manual procedures for critical
business systems and financial reporting processes. We expect to incur significant costs in our ongoing
efforts to integrate and automate these disparate systems into an efficient, effective and unified operation.
The continued lack of automation, and the ongoing reliance on manual procedures in critical business
processes and financial reporting functions increases the risk of errors. If we are not able to successfully
implement the changes necessary to operate a unified system, or automate critical financial reporting
processes then:
‚ We may not be able to take advantage of efficiencies of scale,
‚ We may incur excess costs that could affect our margins
‚ We may lose partners due to inefficiencies with our current systems
‚ We may negatively affect our ability to report our financial results accurately and on a timely basis.
If any of these events were to occur, it could have a material adverse effect on our reputation or
results of operations.
If we fail to establish and maintain an effective system of internal controls over financial reporting,
we may not be able to accurately report our financial results or prevent fraud. This could adversely affect
our operating results and our brand.
We may not be able to establish or maintain adequate internal controls over financial reporting. Many
of our internal controls and reporting systems were designed and originally implemented in smaller,
separate business units while they were part of IAC and may not function as intended in an entity separate
from IAC. In addition, we have a new senior financial management team, with only limited experience
evaluating and managing these controls and processes. Additionally, certain functions, including equity
transactions, income taxes, derivatives, treasury functions, and periodic reporting in accordance with SEC
rules and regulations were previously handled by IAC and have only recently been established at the
Company.
Although we are taking steps to strengthen our internal controls, we cannot be certain that these
measures will ensure that we implement and maintain adequate controls over our financial processes and
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