eBay 2000 Annual Report Download - page 38

‚ increase our brand name awareness; and
‚ provide our customers with superior community and trading experiences.
We are investing heavily in marketing and promotion, customer support, further development of our
websites, technology and operating infrastructure development. The costs of these investments are expected to
remain signiÑcant into the future. In addition, we have signiÑcant ongoing commitments in some of these
areas. As a result, we may be unable to adjust our spending rapidly enough to compensate for any unexpected
revenue shortfall, which may harm our proÑtability. The existence of several larger and more established
companies that are enabling online sales as well as new companies, many of whom do not charge for
transactions on their sites and others who are facilitating trading through other pricing formats (e.g. Ñxed
price, reverse auction, group buying, etc.) may limit our ability to raise user fees in response to declines in
proÑtability. In addition, we are spending in advance of anticipated growth, which may also harm our
proÑtability. In view of the rapidly evolving nature of our business and our limited operating history, we believe
that period-to-period comparisons of our operating results are not necessarily meaningful. You should not rely
upon our historical results as indications of our future performance.
Acquisitions could result in dilution, operating diÇculties and other harmful consequences
We have acquired a number of businesses, including our recently completed acquisitions of Half.com and
Internet Auction Company Ltd. in Korea and our announced acquisition of iBazar S.A., and may in the future
acquire businesses, technologies, services or products that we believe are strategic. The process of integrating
any acquisition may create unforeseen operating diÇculties and expenditures and is itself risky. The areas
where we may face diÇculties include:
‚ diversion of management time (at both companies) during the period of negotiation through closing
and further diversion of such time after closing from focus on operating the businesses to issues of
integration and future products;
‚ decline in employee morale and retention issues resulting from changes in compensation, reporting
relationships, future prospects or the direction of the business;
‚ the need to integrate each company's accounting, management information, human resource and other
administrative systems to permit eÅective management, and the lack of control if such integration is
delayed or not implemented; and
‚ the need to implement controls, procedures and policies appropriate for a larger public company at
companies that prior to acquisition had been smaller, private companies.
Prior to the four large acquisitions we made in 1999, we had almost no experience in managing this
integration process. Many of our acquisitions to date have involved either family-run companies or very early
stage companies, which may worsen these integration issues. Foreign acquisitions involve special risks
including those related to integration of operations across diÅerent cultures, currency risks and the particular
economic and political risks associated with speciÑc countries. Moreover, the anticipated beneÑts of any or all
of our acquisitions may not be realized. Future acquisitions or mergers could result in potentially dilutive
issuances of equity securities, the incurrence of debt, contingent liabilities or amortization expenses related to
goodwill and other intangible assets, any of which could harm our business. Future acquisitions or mergers
may require us to obtain additional equity or debt Ñnancing, which may not be available on favorable terms or
at all. Even if available, this Ñnancing may be dilutive.
The inability to expand our systems may limit our growth
We seek to generate a high volume of traÇc and transactions on our service. The satisfactory
performance, reliability and availability of our websites, processing systems and network infrastructure are
critical to our reputation and our ability to attract and retain large numbers of users. Our revenues depend
primarily on the number of items listed by users, the volume of user transactions that are successfully
completed and the Ñnal prices paid for the items listed. We need to expand and upgrade our technology,
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