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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
¥ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006.
OR
nTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to .
Commission file number 000-24821
eBay Inc.
(Exact name of registrant as specified in its charter)
Delaware 77-0430924
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
2145 Hamilton Avenue
San Jose, California
(Address of principal executive offices)
95125
(Zip Code)
Registrant’s telephone number, including area code:
(408) 376-7400
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class
Common stock
Name of exchange on which registered
The Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ¥No n
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. Yes nNo ¥
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ¥No n
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ¥No n
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¥Accelerated filer nNon-accelerated filer n
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes nNo ¥
As of June 30, 2006, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant
was $34,640,900,000 based on the closing sale price as reported on The Nasdaq Global Select Market.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable
date.
Class Outstanding as of February 16, 2007
Common Stock, $0.001 par value per share 1,368,973,770 shares
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive proxy statement for the registrant’s Annual Meeting of
Stockholders to be held on or about June 14, 2007.

Table of contents

  • Page 1
    ... check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes n No ¥ As of June 30, 2006, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $34,640,900,000 based on the closing sale price as reported...

  • Page 2
    (This page intentionally left blank)

  • Page 3
    ..., Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions and Director Independence ...Principal Accounting Fees and Services ...PART...

  • Page 4
    (This page intentionally left blank)

  • Page 5
    ... public offering of our common stock. Our principal executive offices are located at 2145 Hamilton Avenue, San Jose, California 95125, and our telephone number is (408) 376-7400. When we refer to "we," "our" or "eBay" in this Annual Report on Form 10-K, we mean the current Delaware corporation (eBay...

  • Page 6
    ...marketplaces are most effective, relative to available alternatives, at addressing markets of new and scarce goods, end-of-life products and used and vintage items. Global Community of Buyers and Sellers We have aggregated a significant number of buyers, sellers, and items listed for sale, which, in...

  • Page 7
    ... housing industry. The website is designed as a more effective means of bringing apartments seekers and apartment managers together. Key Services for Buyers and Sellers We have developed a number of features in our eBay.com platform in the areas of Trust and Safety, Customer Support and Value-Added...

  • Page 8
    ...and timely support services to our community of users. Buyers and sellers can contact us through a variety of means, including email, online text chat and, in certain circumstances, telephone. We are focusing our resources on increasing our accessibility and capacity, expanding our category-specific...

  • Page 9
    ... make payments, buyers need to disclose only their email addresses to recipients. Many buyers wary of disclosing financial information online find this high level of personal privacy attractive. Buyers also benefit from PayPal's buyer protection program. Seller Value Proposition PayPal offers online...

  • Page 10
    ... an item for purchase, confirms the payment information and enters his or her email address and password to authorize the payment. PayPal debits the money from the buyer's PayPal balance, credit card, or bank account and credits it to the recipient's PayPal balance. In the case of an eCheck payment...

  • Page 11
    ...networks and can make purchases at any merchant accepting MasterCard. PayPal's Trust and Safety Programs We have developed a number of PayPal trust and safety programs, including PayPal's Seller Protection and Buyer Protection Programs. These programs provide additional protection to certain account...

  • Page 12
    ...of mobile devices. Skype Growth Strategy To expand upon Skype's position as a leading, global Internet communications company, we will continue to focus on new user acquisition and conversion of users to premium offerings, while further developing around two broad areas of Skype's business: existing...

  • Page 13
    ... our PayPal service, our users may choose to pay through a variety of alternative means, including other online payment services, offline payment methods such as cash, check or money order, and traditional online or offline credit card merchant accounts. For our Communications segment, our users may...

  • Page 14
    ... Information Our Internet address is www.ebay.com. Our investor relations website is located at http://investor.ebay.com. We make available free of charge on our investor relations website under "SEC Filings" our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form...

  • Page 15
    ... new users, and to encourage existing users to list items for sale, purchase items through our websites, or use our payment service or communication software and products; • the volume, size, timing, and completion rate of transactions using our websites or technology; • the amount and timing...

  • Page 16
    ... use of the Internet and develop new services, as well as new sources of revenues from our existing services; • manage the costs of our business, including the costs associated with maintaining and enhancing our websites, customer support, transaction and chargeback rates, user protection programs...

  • Page 17
    ... regulation of Internet services, communications, auctioneering, professional selling, distance selling, banking, and money transmitting, that may limit or prevent the offering of our services in some jurisdictions, prevent enforceable agreements between sellers and buyers, prohibit the listing of...

  • Page 18
    ... exchange rates," below. We are continuing to expand PayPal's services internationally. We have limited experience with the payments business outside of the U.S. In some countries, expansion of PayPal's business may require a close commercial relationship with one or more local banks or a shared...

  • Page 19
    ... educational messaging to users about funding choices, and communicate more information regarding protection programs to users. Both eBay and PayPal are likely to receive additional inquiries from regulatory agencies in the future, which may lead to action against either company. We have responded...

  • Page 20
    ..., or changes in management, 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 effective management, and the lack of control if such...

  • Page 21
    ...greater resources to, advertising, marketing, and other efforts to create and maintain brand loyalty among users. During 2004 and 2005, we significantly increased the number of brands we are supporting, adding Rent.com, Shopping.com, Kijiji, and Skype, among others. Each of these brands requires its...

  • Page 22
    ...about by the European Union, or EU, VAT directive on "electronically supplied services," eBay began collecting VAT on the fees charged to EU sellers on eBay sites catering to EU residents. eBay also pays input VAT to suppliers within the various countries the company operates. In most cases, eBay is...

  • Page 23
    ... by users of our eBay and PayPal services could damage our reputation, reduce our ability to attract new users or retain our current users, and diminish the value of our brand names. The current regulatory environment for Voice over Internet Protocol (VoIP) is uncertain, and Skype's business could...

  • Page 24
    ... feasible and may be permitted by applicable law. In addition, Internet service providers could attempt to charge us each time our customers use our offerings. Worldwide, a number of companies have announced plans to take such actions or are selling products designed to facilitate such actions...

  • Page 25
    ...of trade on eBay could decrease and our business would further suffer. PayPal is required to comply with credit card associations' special operating rules for Internet payment services. PayPal and its credit card processors have implemented specific business processes for merchant customers in order...

  • Page 26
    ... in the public's perception of PayPal's compliance with privacy laws and policies could also negatively impact PayPal's business. PayPal's status under banking or financial services laws or other laws in markets outside the U.S. is unclear. PayPal currently allows its customers with credit cards to...

  • Page 27
    ...providing services to customers in one or more countries. PayPal's failure to manage customer funds properly would harm its business. PayPal's ability to manage and account accurately for customer funds requires a high level of internal controls. PayPal has a limited operating history and management...

  • Page 28
    ... customer credit card numbers. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in a compromise or breach of the technology used by us to protect transaction data. In addition, any party who is able to illicitly obtain a user's password...

  • Page 29
    ... targeted by parties using fraudulent "spoof" emails to misappropriate passwords, credit card numbers, or other personal information or to introduce viruses through "trojan horse" programs to our users' computers. These emails appear to be legitimate emails sent by eBay, PayPal, Skype, or a user of...

  • Page 30
    ... and continuing media attention relating to the listing or sale of unlawful goods using our services. This negative publicity could damage our reputation and diminish the value of our brand names. It also could make users reluctant to continue to use our services. PayPal's payment system is also...

  • Page 31
    ... telephone as well as email customer service and must resolve certain customer contacts within shorter time frames. As part of PayPal's program to reduce fraud losses, it may temporarily restrict the ability of customers to withdraw their funds if those funds or the customer's account activity...

  • Page 32
    ... us. Such services include seller tools that automate and manage listings, merchant tools that manage listings and interface with inventory management software, storefronts that help our users list items, and caching services that make our sites load faster, among others. In some cases we have...

  • Page 33
    ... and Home Shopping Network. A number of companies have launched a variety of services that provide new channels for buyers to find and buy items from sellers of all sizes, including online aggregation and classifieds sites such as Oodle.com, Google Base, and Microsoft Live Expo. In 2005, we acquired...

  • Page 34
    • level of service fees; and • quality of search tools. Some current and potential competitors have longer operating histories, larger customer bases and greater brand recognition in other business and Internet sectors than we do. Other online trading services may be acquired by, receive ...

  • Page 35
    ... online credit card acquiring and processing services, and these banks typically have leading market share. In addition, PayPal faces competition from Visa's Visa Direct, MasterCard's MoneySend, and Royal Bank of Scotland's World Pay and Webpay International's Click & Buy in the European Community...

  • Page 36
    ... for some time and the level of market penetration of our services is high, acquiring new users for our services may be more difficult and costly than it has been in the past. In order to expand our user base, we must appeal to and acquire consumers who historically have used traditional means of...

  • Page 37
    ... cost of acquiring new customers, our business could be adversely impacted. The success of Skype depends on continued growth in its number of users, which in turn depends on wider public acceptance of VoIP. The VoIP communications medium is still in its early stages, and it may not develop a broad...

  • Page 38
    ...around the world. We use the properties for executive and administrative offices, data centers, product development offices and customer service offices. Our corporate headquarters of approximately 150,000 square feet are located in San Jose, California. As of December 31, 2006, our owned and leased...

  • Page 39
    ... manner. In June 2006, Net2Phone, Inc. filed a lawsuit in the U.S. District Court for the District of New Jersey (No. 06-2469) alleging that eBay Inc., Skype Technologies S.A., and Skype Inc. infringed five patents owned by Net2Phone relating to point-to-point Internet protocol. The suit seeks...

  • Page 40
    ... 2006, Mangosoft Intellectual Property, Inc. filed a lawsuit in the U.S. District Court for the Eastern District of Texas (No. 2-06CV-390) alleging that eBay Inc., Skype Technologies S.A., and Skype Software S.a.r.l. infringed a patent owned by Mangosoft relating to dynamic directory services...

  • Page 41
    ... gives information about shares of our common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of December 31, 2006, including our 1996 Stock Option Plan, 1997 Stock Option Plan, 1998 Employee Stock Purchase Plan, 1998...

  • Page 42
    ... price of $3.88 per share, to be issued upon exercise of outstanding options assumed by us under the Skype Technologies S.A. Stock Option Plan Rules. All of the options and related plans referenced above were assumed by us in connection with acquisitions. We cannot make subsequent grants or awards...

  • Page 43
    ... the Internet industry, including Internet content and access providers, Internet software and service companies and e-commerce companies. Our stock price performance shown in the graph below is not indicative of future stock price performance. The following graph and related information shall...

  • Page 44
    ... Purchases of Equity Securities Stock repurchase activity during the three months ended December 31, 2006 was as follows: Total Number of Shares Purchased(2) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value that May Yet be...

  • Page 45
    ... share amounts) 2006(2) Consolidated Statement of Income Data(1): Net revenues ...$1,214,100 $2,165,096 $3,271,309 Cost of net revenues ...213,876 416,058 614,415 Gross profit ...Operating expenses: Sales and marketing ...Product development ...General and administrative ...Amortization of acquired...

  • Page 46
    ...net of tax. Because we implemented FAS 123(R) as of January 1, 2006, prior periods do not reflect stock-based compensation expense related to this new accounting standard. See "Note 12 - Stock-Based Plans" to the consolidated financial statements included in this report. (3) The cumulative effect of...

  • Page 47
    ... registered users, active users, listings, gross merchandise volume, eBay stores, total accounts, active accounts, total number of payments, total payment volume, and transaction rates. Members of our senior management also regularly review key financial information including net revenues, operating...

  • Page 48
    ... to increasingly mirror general consumer buying patterns, both online and offline, as our business expands, with the strongest sequential growth occurring in the fourth quarter. Our expectation is that Skype's business will experience seasonally slower growth during holiday and vacation periods...

  • Page 49
    ..., 2006 Net Revenues by Type: Net transaction revenues Marketplaces ...Payments ...Communications ...Total net transaction revenues ...Advertising and other net revenues...Total net revenues...Net Revenues by Segment: Marketplaces ...Payments ...Communications ...Total net revenues...Net Revenues by...

  • Page 50
    ... the sale of advertisements for cash and through barter arrangements. Other net revenues are derived principally from contractual arrangements with third parties that provide transaction services to eBay and PayPal users and interest earned from banks on certain PayPal customer account balances. 46

  • Page 51
    ... the result of our promotional efforts, our emphasis on helping our user community be successful through the introduction of new site features and functionality, our international expansion, and expanded trust and safety programs. The number of items listed on eBay.com's platforms increased 26...

  • Page 52
    ... will be negatively impacted. We expect Communications net transaction revenues to increase during 2007 as we expect to continue to increase both our user base and product offerings. Advertising and Other Net Revenues Advertising and other net revenues totaled $171.8 million in 2006, $123.4 million...

  • Page 53
    ... tax benefits, related to stock-based incentive awards granted under our equity incentive plans. That cost is expected to be recognized over a weighted-average period of three years. Cost of Net Revenues 2004 2005 2006 (In thousands, except percentages) Cost of net revenues ...As a percentage...

  • Page 54
    ... of advertising costs, marketing programs and employee compensation for sales and marketing staff. Sales and marketing expenses increased in total and increased as a percentage of total net revenues in 2006 due to our continued investment in growing our global user base and the effect of stock-based...

  • Page 55
    ... to increase in total during 2007 because of expected increases in our online marketing expense to attract new customers and increase user activity across our businesses. Sales and marketing expenses as a percentage of net revenues are expected to decrease during 2007 due to the growth in Payments...

  • Page 56
    ... The higher levels of credit card chargebacks is due to strategically entering into new customer segments (new countries and direct card processing) which have higher loss rates. Stock-based compensation expense of $106.4 million was included in general and administrative expense in 2006 compared to...

  • Page 57
    ... the effective tax rate for 2007 to be consistent with 2006. Impact of Foreign Currency Translation During 2006, 2005 and 2004, our international net revenues, based upon the country in which the seller, payment recipient, Skype user's Internet protocol address, advertiser or other service provider...

  • Page 58
    ...-based program helps us to attract, motivate, and retain high quality employees, to the ultimate benefit of our stockholders. We granted a limited number of restricted stock units and restricted stock awards to employees during 2006. Stock options, restricted stock units and restricted stock awards...

  • Page 59
    ... long-term assets, provision for doubtful accounts and authorized credits resulting from increasing revenues and the provision for transaction losses related to PayPal. Prior to adopting FAS 123(R), we presented all tax benefits resulting from the exercise of stock options as operating cash flows in...

  • Page 60
    ... foreign currencies, primarily the Euro. The negative effect of exchange rates on cash and cash equivalents during 2005 was due to the strengthening of the U.S. dollar against other foreign currencies, primarily the Euro. In November 2006, we entered into a credit agreement which provides for an...

  • Page 61
    ...such marks are applicable to our performance under the subject agreement. In a limited number of agreements, we have provided an indemnity for other types of third-party claims, substantially all of which are indemnities related to copyrights, trademarks, and patents. In our PayPal business, we have...

  • Page 62
    ...estimated losses arising from processing customer transactions, such as charge-backs for unauthorized credit card use and merchantrelated charge-backs due to non-delivery of goods or services, Automated Clearing House, or ACH, returns, buyer protection program claims and debit card overdrafts. These...

  • Page 63
    ... elsewhere in this Annual Report on Form 10-K. We believe that we have meritorious defenses to the claims against us, and we will defend ourselves vigorously. However, even if successful, our defense against certain actions will be costly and could divert our management's time. If the plaintiffs...

  • Page 64
    ... sale of online advertisements for cash and through barter arrangements. Other net revenues are derived principally from contractual arrangements with third parties that provide transaction services to eBay and PayPal users and interest earned from banks on certain PayPal customer account balances...

  • Page 65
    ... model requires extensive actual employee exercise behavior data and a number of complex assumptions including expected life, expected volatility, risk-free interest rate and dividend yield. The weighted-average grant-date fair value of stock options granted during 2006 was $10.47 per share, using...

  • Page 66
    ... money market funds. These securities are generally classified as available for sale and consequently are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss), net of estimated tax. Investments...

  • Page 67
    ...ended December 31, 2006, the realized gains and losses related to these hedges were not significant. A hypothetical uniform 10% strengthening or weakening in the value of the U.S. dollar relative to the Euro, British pound and Korean won in which our revenues and profits are denominated would result...

  • Page 68
    ...of intellectual property and technology and for certain corporate services provided by eBay and PayPal. These charges are denominated in Euros and these forecasted inter-company transactions represent a foreign currency cash flow exposure. To reduce foreign exchange risk relating to these forecasted...

  • Page 69
    ...OTHER INFORMATION Not applicable. PART III ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Incorporated by reference from our Proxy Statement for our 2007 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2006. Code...

  • Page 70
    PART IV ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: 1. Consolidated Financial Statements: Page Number Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheet ...Consolidated Statement of Income ......

  • Page 71
    ... and among Registrant and the parties identified on Schedule I thereto. Form of Indemnity Agreement entered into by Registrant with each of its directors and executive officers. Registrant's 1996 Stock Option Plan, as amended. Registrant's 1997 Stock Option Plan, as amended. Registrant's 1998 Equity...

  • Page 72
    ...Unit Plan, as amended. 10.16+ Form of 2003 Deferred Stock Unit Plan Electing Director Award Agreement, as amended. 10.17+ Form of 2003 Deferred Stock Unit Plan New Director Award Agreement, as amended. 10.18+ eBay Incentive Plan. 10.19+ Summary of Compensation Payable to Named Executive Officers. 10...

  • Page 73
    ...Registrant's Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002. X X X + Indicates a management contract or compensatory plan or arrangement (b) See the Exhibits listed under Item 15 (a) (3) above. (c) The financial statement schedules required by this item are...

  • Page 74
    ...it accounts for share-based compensation in 2006. Internal control over financial reporting Also, in our opinion, management's assessment, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over...

  • Page 75
    ... any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ PricewaterhouseCoopers LLP San Jose, California February 27, 2007...

  • Page 76
    eBay Inc. CONSOLIDATED BALANCE SHEET December 31, 2005 2006 (In thousands, except par value amounts) ASSETS Current assets: Cash and cash equivalents ...Short-term investments ...Accounts receivable, net ...Funds receivable from customers ...Restricted cash ...Other current assets...Total current ...

  • Page 77
    ... December 31, 2004 2005 2006 (In thousands, except per share amounts) Net revenues ...$3,271,309 Cost of net revenues ...614,415 Gross profit...Operating expenses: Sales and marketing ...Product development ...General and administrative ...Amortization of acquired intangible assets ...2,656,894...

  • Page 78
    ... 2004 Year Ended December 31, 2005 2006 (In thousands) Net income ...$778,223 Other comprehensive income (loss): Foreign currency translation ...Unrealized gains (losses) on investments ...Unrealized gains (losses) on cash flow hedges ...Estimated tax benefit/(provision) on above items ...Other...

  • Page 79
    ...31, 2005 (In thousands) 2006 Common stock: Balance, beginning of year ...Common stock issued ...Balance, end of year ...Additional paid-in-capital: Balance, beginning of year ...Common stock issued ...Stock-based compensation ...Stock option income tax benefit ...Reclassification to additional paid...

  • Page 80
    ... ...Tax benefit on the exercise of stock options ...Excess tax benefits from stock-based compensation ...Deferred income taxes ...Minority interests ...Changes in assets and liabilities, net of acquisition effects: Accounts receivable ...Funds receivable and customer accounts ...Other current assets...

  • Page 81
    ... SA ("Skype") business, enables Voice over Internet Protocol (VoIP) calls between Skype users, as well as provides low-cost connectivity to traditional fixed-line and mobile telephones. When we refer to "we," "our," "us" or "eBay" in this document, we mean the current Delaware corporation (eBay Inc...

  • Page 82
    ... institutions that management believes are of high credit quality. Our accounts receivable are derived from revenue earned from customers located in the U.S. and internationally. Accounts receivable balances are settled through customer credit cards, debit cards, and PayPal accounts, with the...

  • Page 83
    ... customers Funds receivable and payable relate to our Payments segment and arise due to the time taken to clear transactions through external payment networks. When customers fund their account using their bank account or credit card, or withdraw money from their bank account or through a debit card...

  • Page 84
    ... one buyer has bid above the seller's specified minimum price or reserve price, whichever is higher, at the end of the transaction term. Lead referral fee revenue is generated from lead referral fees based on the number of times a user clicks through to a merchant's website from our websites. Lead...

  • Page 85
    ... promotional activities which result in payments to our users. Our other revenues are derived principally from contractual arrangements with third parties that provide transaction services to eBay and PayPal users and interest earned from banks on certain PayPal customer account balances. Revenues...

  • Page 86
    ... the indirect effects of stockbased compensation on the research tax credit and the foreign tax credit through the income statement. Income taxes We account for income taxes using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and...

  • Page 87
    ... during the period. The dilutive effect of outstanding options, restricted stock units and nonvested stock is reflected in diluted earnings per share by application of the treasury stock method, which in 2006 includes consideration of stock-based compensation required by FAS 123(R). The following...

  • Page 88
    ...Customer List/ User Base Trade name/ Trademarks Developed Technologies Other Intangible Assets Total Acquired Intangible Assets Company Name Rent.com ...International classified websites ...Shopping.com ...Skype...Verisign's Payment Gateway Business ...Tradera.com ... 2005 2005 2005 2005 2005 2006...

  • Page 89
    ...The estimated useful economic lives of the identifiable intangible assets acquired in the Rent.com acquisition are six years for the customer list, five years for the trade name, three years for the developed technology and the advertising relationships, and one year for the user base. International...

  • Page 90
    .... 28. The estimated useful economic lives of the identifiable intangible assets acquired in the Skype acquisition are five years for registered user technology and trade names, two years for existing technology, and one year for network access agreements. Supplemental information on an unaudited pro...

  • Page 91
    ... intangible assets acquired in the acquisition are four years for user base and one year for developed technology and trade name. The final purchase price allocation will depend upon the completion of our integration plan in the second quarter of 2007. Goodwill Goodwill information for each...

  • Page 92
    ... identifiable intangible assets are comprised of customer lists and user base, trademarks and trade names, developed technologies, and other acquired intangible assets including patents and contractual agreements. No significant residual value is estimated for the intangible assets. The increase...

  • Page 93
    ... 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, site operations expenses, product development...

  • Page 94
    ... upon the country in which the seller, payment recipient, advertiser or end-to-end service provider is located. The United Kingdom and Germany accounted for greater than 10% of our total net revenues for the years ended December 31, 2004, 2005, and 2006, respectively. Long-lived assets attributed to...

  • Page 95
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 5 - Investments: At December 31, 2005 and 2006, short and long-term investments were classified as available-for-sale securities, except for restricted cash, and are reported at fair value as follows (in thousands): Gross ...

  • Page 96
    ... value of all these investments upon maturity or sale. As of December 31, 2006, the losses on these securities have an average remaining duration of approximately two months. Restricted cash is held primarily in money market funds and interest bearing accounts for letters of credit related primarily...

  • Page 97
    ...intellectual property and technology and for certain corporate services provided by eBay and by PayPal. These charges are denominated in Euros and these forecasted inter-company transactions represent a foreign currency cash flow exposure. To reduce foreign exchange risk relating to these forecasted...

  • Page 98
    ...Other current assets: Customer accounts...$324,595 Prepaid expenses ...44,610 Deferred tax assets, net ...59,274 Other...58,756 $487,235 $763,757 64,003 67,879 64,822 $960,461 December 31, 2005 2006 (In thousands) Property and equipment, net: Computer equipment and software ...Land and buildings...

  • Page 99
    ... corporate purposes of eBay and its subsidiaries. We entered into the credit agreement in order to enhance our financial flexibility. As of December 31, 2006, we had not borrowed any funds under the credit agreement. Litigation and Other Legal Matters In April 2001, two of our European subsidiaries...

  • Page 100
    ... also filed a lawsuit in the Paris Court of Commerce against eBay Inc. and eBay International AG. The complaint alleges that we have interfered with the selective distribution network plaintiffs' have set up in France and the European Union by allowing third parties to post listings offering genuine...

  • Page 101
    .... In August 2006, Peer Communications Corporation filed a lawsuit in the U.S. District Court for the Eastern District of Texas (No. 6-06CV-370) alleging that eBay Inc., Skype Technologies S.A., and Skype Inc. infringed two patents owned by Peer Communications relating to uniform network access. The...

  • Page 102
    ... STATEMENTS - (Continued) number of agreements, we have provided an indemnity for other types of third-party claims, substantially all of which are indemnities related to copyrights, trademarks, and patents. In our PayPal business, we have provided an indemnity to our payment processors in the event...

  • Page 103
    ... requirements, price and other market conditions. The program is intended to comply with the volume, timing and other limitations set forth in Rule 10b-18 under the Securities Exchange Act of 1934. Note 12 - Stock-Based Plans: Employee Stock Purchase Plan We have an employee stock purchase plan...

  • Page 104
    ... value of each option award on the date of grant using the Black-Scholes option pricing model. The following weighted-average assumptions were used for each respective period: Year Ended December 31, 2004 2005 2006 Risk-free Expected Dividend Expected interest rates...life ...yield ...volatility...

  • Page 105
    ...) Stock-Based Compensation Stock-based compensation expense related to stock options and employee stock purchases for 2004, 2005 and 2006 was allocated as follows (in thousands, except per share amounts): 2004 2005 2006 Cost of net revenues ...Sales and marketing ...Product development ...General...

  • Page 106
    ...awarded to employees under our equity incentive plans. In general, restricted stock units and nonvested shares vest over three to five years and are subject to the employees' continuing service to the company. The cost of restricted stock units and nonvested shares is determined using the fair value...

  • Page 107
    ... stock units granted under our equity incentive plans as of December 31, 2006 and changes during the year ended December 31, 2006 is presented below (in thousands, except per share amounts): Shares Weighted Average Grant-Date Fair Value (per share) Outstanding at January 1, 2006 ...Awarded...

  • Page 108
    ... options at an average exercise price of $0.39. There were no shares remaining available under these non-stockholder approved plans for future grants as of December 31, 2006. Note 13 - Income Taxes: The components of pretax income before cumulative effect of accounting change and minority interest...

  • Page 109
    ... using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant deferred tax assets and liabilities consist of the following (in thousands): December 31, 2005 2006 Deferred tax assets: Net operating loss and credits ...Accruals, allowances and stock...

  • Page 110
    .... When realized, the tax benefits of tax deductions related to stock options are accounted for as an increase to additional paid-in capital rather than a reduction of the income tax provision. Our profitability coupled with the level of stock option deductions generated during 2006 resulted in the...

  • Page 111
    ...financial information for each of the eight quarters ended December 31, 2006. This quarterly information ... Ended June 30 September 30 2006 Net revenues ...Gross profit...Net income ...Net income per share-basic ...Net income per share-diluted ...Weighted-average shares: Basic ...Diluted ... $1,390...

  • Page 112
    eBay Inc. FINANCIAL STATEMENT SCHEDULE The Financial Statement Schedule II - VALUATION AND QUALIFYING ACCOUNTS is filed as part of this Annual Report on Form 10-K. Balance at Beginning of Period Charged/ Credited to Net Income Charged to Other Account (In thousands) Charges Utilized/ Write-offs ...

  • Page 113
    SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 27th day of ...

  • Page 114
    Additional Directors By: /s/ Pierre M. Omidyar Pierre M. Omidyar Founder, Chairman of the Board and Director By: /s/ Edward W. Barnholt Edward W. Barnholt Director By: /s/ Scott D. Cook Scott D. Cook Director By: /s/ Robert C. Kagle Robert C. Kagle Director By: /s/ Richard T. Schlosberg, III Richard...