eBay 2005 Annual Report Download - page 103

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Note 4 Ì Segments:
Reporting segments are based upon our internal organization structure, the manner in which our
operations are managed, the criteria used by our chief operating decision-maker to evaluate segment
performance, the availability of separate financial information, and overall materiality considerations.
The U.S. Marketplaces segment includes U.S. online marketplaces commerce platforms. The Interna-
tional Marketplaces segment includes our international online marketplaces commerce platforms. The
Payments segment includes our global payments platform consisting of our PayPal subsidiary. The Communi-
cations segment includes the VoIP offerings provided by our Skype subsidiary. Results from our Communica-
tions segment reflect Skype operations for the post-acquisition period from October 15, 2005 through
December 31, 2005.
Direct contribution consists of revenues less direct costs. Direct costs include specific costs of net
revenues, sales and marketing expenses, and general and administrative expenses over which segment
managers have direct discretionary control, such as advertising and marketing programs, customer support
expenses, bank charges, provisions for doubtful accounts, authorized credits and transaction losses. Expenses
over which segment managers do not currently have discretionary control, such as certain general and
administrative costs, are monitored by management through shared cost centers and are not evaluated in the
measurement of segment performance. Prior period amounts have been reclassified to reflect the current
management of site operations cost and product development expenses as direct costs.
The following table summarizes the financial performance of our reporting segments (in thousands):
Year Ended December 31, 2003
U.S. International
Marketplaces Marketplaces Payments Consolidated
Net revenues from external customersÏÏÏÏÏ $1,062,834 $664,640 $437,622 $2,165,096
Direct costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 631,154 317,887 355,075 1,304,116
Direct contribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 431,680 346,753 82,547 860,980
Operating expenses and indirect costs of
net revenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 231,739
Income from operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 629,241
Interest and other income, net ÏÏÏÏÏÏÏÏÏÏÏ 36,573
Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,314)
Income before cumulative effect of
accounting change, taxes and minority
interests ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 661,500
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