eBay 2008 Annual Report Download

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Table of contents

  • Page 1

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  • Page 3
    .... In 2008, advertising, global classifieds and StubHub, the leading online tickets marketplace, all gained momentum in terms of revenues. Key acquisitions we made during the year will help us build on our strengths. Fraud Sciences enhances PayPal's risk management capabilities. Bill Me Later further...

  • Page 4
    ... fully credited in the value of the company. During 2009, we expect that PayPal, advertising, classifieds, StubHub and our other businesses will continue to contribute more revenue, more earnings, and more opportunities as we grow, scale and diversify the ways in which we connect buyers and sellers...

  • Page 5
    ... 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 Name of exchange on which...

  • Page 6
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  • Page 7
    eBay Inc. Form 10-K For the Fiscal Year Ended December 31, 2008 TABLE OF CONTENTS Page PART I Item 1. Business ...Item 1A. Risk Factors ...Item 1B. Unresolved Staff Comments ...Item 2. Properties ...Item 3. Legal Proceedings ...Item 4. Submission of Matters to a Vote of Security Holders ...PART II ...

  • Page 8
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  • Page 9
    ... tickets marketplace (StubHub), our online shopping comparison website (Shopping.com), our apartment listing service platform (Rent.com), as well as our fixed price media marketplace (Half.com). Our Payments segment is comprised of our online payment solutions PayPal and Bill Me Later (which...

  • Page 10
    ...all types and sizes with access to broad markets. We have aggregated a significant number of buyers, sellers and items listed for sale, which, in turn, has resulted in a vibrant online commerce environment. Our sellers generally enjoy good conversion rates selling goods on our Marketplaces platforms...

  • Page 11
    ... twelve months. Users who develop positive reputations have color-coded star symbols displayed next to their user names to indicate the number of positive feedback ratings they have received. In addition to leaving an overall feedback rating (positive, neutral or negative) for a seller, buyers also...

  • Page 12
    ... easier for buyers and sellers to calculate shipping costs; • Shipping Labels, which allows sellers to print certain postage and UPS labels; • eBay To Go, which allows users to embed item listings in their own Internet websites; and • PayPal, which facilitates the online exchange of funds. We...

  • Page 13
    ...changes reduced the upfront cost of listing fixed-price items on eBay so that fees are now based more on the successful sale of items. In addition, final value fees also have been rebalanced on a category-by-category basis. We encourage sellers to offer reasonable or free shipping to our buyers by 5

  • Page 14
    ...made on eBay.com. When using Bill Me Later to obtain transactional credit, buyers need to provide only their name, address, birth date and the last four digits of their social security number. Many buyers wary of disclosing financial information online find the limited amount of information they are...

  • Page 15
    ... opens an account to send money for an eBay purchase or a purchase on another website, a payment for services rendered, or a payment to an individual in lieu of cash or check. Allowing new account holders to join the network when they make or receive payments encourages PayPal's natural, user...

  • Page 16
    ... security number and, if approved, Bill Me Later opens an account for the buyer. This account can be used on any other U.S. merchant site offering the Bill Me Later payment option. Once established, customers can then manage their accounts online with access to their transaction history and monthly...

  • Page 17
    ... secure method of payment on the Internet, enhancing our product offering for our merchants and utilizing multiple sales channels. To establish PayPal and Bill Me Later as the online payment solution of choice, we intend to continue focusing on increased user adoption of PayPal on our Marketplaces...

  • Page 18
    ... account to make payments on the Internet everywhere that MasterCard is accepted (including websites that do not accept PayPal); • PayPal Money Market Fund, which allows participants to earn a yield on the funds in their PayPal account; and • Bill Me Later transactional point of sale credit...

  • Page 19
    ... those new offerings. We compete on the basis of price, product selection, and services. Our growth rates in our most mature markets have significantly slowed and we are losing market share in some segments. For our Payments segment, our users may choose to pay through a variety of alternative means...

  • Page 20
    ... statements included elsewhere in this Annual Report on Form 10-K. Available 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 the heading "SEC Filings...

  • Page 21
    ... new users, and encourage existing users to list items for sale, purchase items through our websites, or use our payment service or communication software and products, especially when consumer spending is contracting; • our ability to reduce the loss of active buyers and sellers and increase...

  • Page 22
    ... of new sites, services, and products; • consumer confidence in the safety and security of transactions using our websites or technology and our ability to manage the costs of our user protection programs; • our ability to manage PayPal's payment funding mix and the transaction loss rate in...

  • Page 23
    ... fixed-price items and higher service levels, our business will suffer. In January and June 2008, we announced significant changes to our Marketplaces business in four major areas: fee structure, seller incentives, standards and buyer and seller feedback and increased buyer and seller protections in...

  • Page 24
    ... through our service by our users infringe third-party copyrights, trademarks and trade names, or other intellectual property rights. Although we have sought to work actively with the owners of intellectual property rights to eliminate listings offering infringing items on our websites, some rights...

  • Page 25
    ... of software and other intellectual property, money laundering, bank fraud, child pornography trafficking, prohibited sales of alcoholic beverages or tobacco products, and online securities fraud. Recent changes in law have increased the penalties for intermediaries providing payment services for...

  • Page 26
    ... requiring sellers to offer PayPal as a payment alternative on most transactions on our localized Australian website and precluding sellers from imposing a surcharge or any other fee for accepting PayPal as a payment method. Similarly, Bill Me Later has from time to time received customer complaints...

  • Page 27
    ... service, PayPal continually strives to maintain the right balance of appropriate measures to promote both convenience and security for customers. Identity thieves and those committing fraud using stolen credit card or bank account numbers can potentially steal large amounts of money from businesses...

  • Page 28
    ... confidential information over public networks. Our security measures may not detect or prevent security breaches that could harm our business. Currently, a significant number of our users authorize us to bill their credit card accounts directly for all transaction fees charged by us. PayPal's users...

  • Page 29
    ... problem that may damage our brands, discourage use of our websites, and increase our costs. Changes in regulations or user concerns regarding privacy and protection of user data could adversely affect our business. We are subject to laws relating to the collection, use, retention, security and...

  • Page 30
    ... the types of goods and services listed on our websites expand, including through acquisitions such as our acquisition of Bill Me Later, a transactional credit provider, in November 2008 and StubHub, an online ticket marketplace, in February 2007, regulatory agencies or courts may claim or hold that...

  • Page 31
    ... and licensure claims could result in costly litigation and, if successful, could require us to change the way we or our users do business in ways that increase costs or reduce revenues (for example, by forcing us to prohibit listings of certain items for some locations). We could also be subject to...

  • Page 32
    ...order PayPal (Europe) to conduct its activities in the local country through a branch office. Any such responses from these regulators could increase the cost of, or delay, PayPal's plans for expanding its business. In markets other than the U.S., EU, Australia and China, PayPal serves its customers...

  • Page 33
    ... of trade on eBay could decrease and our business would further suffer. PayPal is required to comply with credit card networks' special operating rules for Internet payment services. PayPal and its credit card processors have implemented specific business processes for merchant customers in order to...

  • Page 34
    ...'s payment volume funded using credit cards has increased over time. In addition, some of PayPal's newer offerings, including the ability to make a limited number of payments without opening an account, have a higher rate of credit card funding than PayPal's basic product offering. In September 2006...

  • Page 35
    ... selling, distance selling, privacy and data protection, 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 certain categories of goods, require product...

  • Page 36
    ... also could become subject to increased difficulties in collecting accounts receivable, repatriating money without adverse tax consequences, and risks relating to foreign currency exchange rate fluctuations. The impact of currency exchange rate fluctuations is discussed in more detail under "We are...

  • Page 37
    ... credit to Bill Me Later customers in order to offer the Bill Me Later service. When a consumer makes a purchase using the Bill Me Later service, CIT Bank funds the consumer loan at the point of sale and advances funds to the merchant, and Bill Me Later subsequently purchases the receivable related...

  • Page 38
    ... to change its business practices." Our business and users may be subject to sales tax and other taxes. The application of indirect taxes (such as sales and use tax, value-added tax, or VAT, goods and services tax, business tax, and gross receipt tax) to ecommerce businesses such as eBay and to our...

  • Page 39
    ... PayPal to request tax ID numbers from U.S. users and track payments by tax ID number. This requirement may decrease seller activity and harm our business. One or more other jurisdictions may also seek to impose tax-collection or reporting obligations based on the location of the product or service...

  • Page 40
    ... be applicable to Skype. Such new rules and regulations are likely to increase our costs of doing business and could prevent us from delivering our products and offerings over the Internet, which could adversely affect Skype's customer base, and thus its revenue. Skype depends on key technology that...

  • Page 41
    ... 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. Interference with our offerings or...

  • Page 42
    ... our users that benefit 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, caching services that make our sites load faster, and shipping providers...

  • Page 43
    ... pricing. In addition, sellers are increasingly utilizing multiple sales channels, including the acquisition of new customers by paying for search-related advertisements on search engine sites such as Google and Yahoo!. We use product search engines and paid search advertising to channel users...

  • Page 44
    ... sales of goods or services over the Internet could force eBay users to stop selling certain products on our websites. Increased competition or antiInternet distribution policies or regulations may result in reduced operating margins, loss of market share and diminished value of our brand. In order...

  • Page 45
    ... 2008, we require sellers on eBay.com to accept one or more accepted payment methods (currently PayPal, credit or debit cards processed through Internet merchant accounts, and/or ProPay) and no longer allow any forms of paper payment, including checks and money orders, to be used in the U.S. for...

  • Page 46
    ...a bank in Luxembourg. They may devote greater resources to the development, promotion, and sale of products and services than PayPal, and they may offer lower prices. For example, Google Checkout provided free payment processing through February 1, 2008, and currently offers free payments processing...

  • Page 47
    ..., slower response times, degradation in levels of customer support, impaired quality of users' experiences of our services, impaired quality of services for third-party application developers using our externally accessible Application Programming Interface, or API, and delays in reporting accurate...

  • Page 48
    ..., and security, as well as timely development of complementary products, for providing reliable Internet access and services. The Internet has experienced, and is likely to continue to experience, significant growth in the numbers of users and amount of traffic. The Internet infrastructure may be...

  • Page 49
    ...are located in San Jose, California. As of December 31, 2008, the total square footage generally used by each of our Marketplaces, Payments and Communications segments was approximately 2.1 million, 1.6 million and 0.1 million, respectively. From time to time we consider various alternatives related...

  • Page 50
    ... to post listings offering genuine perfumes and cosmetics for sale on our websites. In June 2008, the Paris Court of Commerce ruled that eBay and eBay International AG were liable for failing to prevent the sale of counterfeit items on its websites that traded on plaintiffs' brand names and for...

  • Page 51
    ... number and significance of these disputes and inquiries are increasing as our business expands and our company grows larger. Any claims or regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time...

  • Page 52
    PART II ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Price Range of Common Stock Our common stock has been traded on The Nasdaq Global Select Market (formerly The Nasdaq National Market) under the symbol "EBAY" since September ...

  • Page 53
    ... weighted index representing the Internet industry, including Internet software and services and Internet retail 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 not be deemed...

  • Page 54
    Issuer Purchases of Equity Securities Stock repurchase activity during the three months ended December 31, 2008 was as follows: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value that May Yet be ...

  • Page 55
    ... Financial Condition and Results of Operations" appearing elsewhere in this Annual Report on Form 10-K. The consolidated statement of income and the consolidated balance sheet data for the years ended, and as of, December 31, 2004, 2005, 2006, 2007 and 2008 are derived from our audited consolidated...

  • Page 56
    ... further details regarding reclassified amounts see "Note 1 - The Company and Summary of Significant Accounting Policies" to the consolidated financial statements included in this report. (2) Consolidated Statement of Income for the years ended December 31, 2006, 2007 and 2008 includes stock-based...

  • Page 57
    ... businesses, our secondary tickets marketplace (StubHub), our online shopping comparison website (Shopping.com), our apartment listing service platform (Rent.com), as well as our fixed price media marketplace (Half.com). Our payments segment is comprised of our online payment solutions - PayPal...

  • Page 58
    ... the seller, payment recipient, customer, Skype user's Internet protocol address, online property that generates advertising, or other service provider, as the case may be, is located. Because we generate the majority of our revenue internationally, fluctuations in foreign currency exchange rates...

  • Page 59
    ...,755 Total net revenues ...$5,969,741 Year Ended December 31, 2006 2007 2008 (in millions) Supplemental Operating Data: Marketplaces Segment: Gross merchandise volume(2) ...Payments Segment: Net total payment volume(3) ...Communications Segment: Registered Users(4) ...SkypeOut Minutes(5) ... $52...

  • Page 60
    ...closed items between users on eBay Marketplaces trading platforms during the period, regardless of whether the buyer and seller actually consummated the transaction. (3) Total dollar volume of payments, net of payment reversals, successfully completed through our payments network or on Bill Me Later...

  • Page 61
    ... of rule changes made by third-party search engines that adversely affected click-through traffic to retailers from our Shopping.com website and reduced associated fees. Additionally, a decline in interest rates reduced interest earned from banks on certain U.S. PayPal customer account balances and...

  • Page 62
    ...revenues consists primarily of costs associated with payment processing, customer support and site operations and Skype telecommunications. Significant components of these costs include bank transaction fees, credit card interchange fees, assessments, Bill Me Later related interest charges, employee...

  • Page 63
    ... growing our active user base. We direct customers to our websites primarily through a number of online marketing channels such as sponsored search, portal advertising, email campaigns and other initiatives. Growth in advertising and marketing costs, as well as employee-related costs, comprised the...

  • Page 64
    ... equipment related costs to support several platform development initiatives to enhance the user experience and expand our existing product offerings primarily across our Marketplaces and Payments segments. Product development expenses as a percentage of net revenues decreased slightly from 2006 as...

  • Page 65
    ...2006. However, in 2007, we recorded a $1.4 billion impairment of goodwill charge related to our Communications segment. Our estimates of future operating results for our Communications reporting unit are for an early stage business with limited financial history, as well as developing revenue models...

  • Page 66
    ... interest rates. In addition, as a result of the acquisition of Bill Me Later, we include a portion of interest expense within cost of net revenues which represents our estimated cost of funds associated with Bill Me Later loan activity. The increase in interest expense in 2007 compared to 2006 was...

  • Page 67
    ... of Fraud Ëš Avis and BilBasen and Bill Me Later. In 2007, acquisition activity primarily consisted of a Sciences, Den Bla $530.3 million earn out settlement payment related to our 2005 Skype acquisition and our acquisition of StubHub. In 2006, we acquired Tradera.com. Financing Activities The net...

  • Page 68
    ... corporate and regulatory requirements, price and other market conditions and management's determination as to the appropriate use of our cash. The programs are intended to comply with the volume, timing and other limitations set forth in Rule 10b-18 under the Securities Exchange Act of 1934...

  • Page 69
    ... amount outstanding under the line of credit within the next twelve months. As we are unable to reasonably predict the timing of settlement of liabilities related to unrecognized tax benefits under FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48), the table does not...

  • Page 70
    ...the subject agreement. In a limited number of agreements, we have provided an indemnity for other types of third-party claims, which are indemnities mainly related to various intellectual property rights. In our PayPal business, we have provided an indemnity to our payment processors in the event of...

  • Page 71
    ... our defense against certain actions will be costly and could divert our management's time. If the plaintiffs were to prevail on certain claims, we might be forced to pay significant damages and licensing fees, modify our business practices or even be prohibited from conducting a significant part of...

  • Page 72
    .... It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the quarter of such change. We file annual income tax returns in multiple taxing jurisdictions around the world. A number of years may elapse before...

  • Page 73
    ...consolidated financial statements included in this report. We calculated the fair value of each restricted stock award based on our stock price on the date of grant. We calculated the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The determination...

  • Page 74
    grant-date fair value of stock options granted during 2006, 2007 and 2008 was $10.47, $10.60 and $7.46 per share, respectively, using the Black-Scholes model with the following weighted-average assumptions: Year Ended December 31, 2006 2007 2008 Risk-free Expected Dividend Expected interest rate ...

  • Page 75
    ... without significantly increasing risk. To achieve this objective in the current uncertain global financial markets, as of December 31, 2008, approximately 92% of our total cash and investment portfolio were held in bank deposits and money market funds. As such, changes in interest rates will impact...

  • Page 76
    ...a monthly basis for their use of intellectual property and technology and for certain corporate services provided by eBay and by PayPal. These charges are denominated in Euros and these forecasted intercompany transactions represent a foreign currency cash flow exposure. We purchase foreign exchange...

  • Page 77
    ... of more complex market changes that could arise, which may positively or negatively affect income. ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and accompanying notes listed in Part IV, Item 15(a)(1) of this Annual Report on Form 10-K are included...

  • Page 78
    ... Statement for our 2009 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2008. Code of Ethics, Governance Guidelines and Committee Charters We have adopted a Code of Business Conduct and Ethics that applies to all eBay employees...

  • Page 79
    PART IV ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULE (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 80
    All other schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. 3. Exhibits. No. Exhibit Description Filed with this 10-K Form Incorporated by Reference File No. Date Filed Sale and Purchase ...

  • Page 81
    No. Exhibit Description Filed with this 10-K Form Incorporated by Reference File No. Date Filed Form of Stock Option Agreement under Registrant's 1999 Global Equity Incentive Plan. 10.12+ Form of Restricted Stock Unit Agreement under Registrant's 1999 Global Equity Incentive Plan. 10.13+ ...

  • Page 82
    ..., and other lenders named from time to time therein. 10.39 Form of Earn Out Settlement Agreement dated as of September 28, 2007 among Registrant, Skype Luxembourg Holdings S.a.r.l., Skype Technologies S.A., Herho Holdings B.V. and each Earn Out Seller. 12.01 Statement regarding computation of ratio...

  • Page 83
    ..., on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and...

  • Page 84
    ...' EQUITY Current liabilities: Accounts payable ...$ 156,613 Funds payable and amounts due to customers ...1,513,578 Accrued expenses and other current liabilities ...951,139 Deferred revenue and customer advances ...166,495 Income taxes payable ...111,754 Borrowings under credit agreement ...200,000...

  • Page 85
    eBay Inc. CONSOLIDATED STATEMENT OF INCOME Year Ended December 31, 2006 2007 2008 (in thousands, except per share amounts) Net revenues ...$5,969,741 Cost of net revenues ...1,256,792 Gross profit ...Operating expenses: Sales and marketing ...Product development ...General and administrative ......

  • Page 86
    ...2006 Year Ended December 31, 2007 2008 (in thousands) Net income ...$1,125,639 Other comprehensive income: Foreign currency translation ...Change in unrealized gains (losses) on investments ...Change in unrealized gains (losses) on cash flow hedges ...Estimated tax (provision)benefit on above items...

  • Page 87
    eBay Inc. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 2006 Year Ended December 31, 2007 (in thousands) 2008 Common stock: Balance, beginning of year ...$ 1,412 Common stock issued ...19 Balance, end of year ...1,431 Additional paid-in-capital: Balance, beginning of year ...7,272,742 Common stock...

  • Page 88
    ... benefit from stock-based compensation ...Excess tax benefits from stock-based compensation ...Changes in assets and liabilities, net of acquisition effects: Accounts receivable ...Funds receivable and customer accounts ...Other current assets ...Other non-current assets...Accounts payable ...Funds...

  • Page 89
    ... online classifieds businesses, our secondary tickets marketplace, StubHub, our online shopping comparison website, Shopping.com, our apartment listing service platform, Rent.com, as well as our fixed price media marketplace (Half.com). Our Payments segment is comprised of payment solutions PayPal...

  • Page 90
    ... and funds receivable are potentially subject to concentration of credit risk. Cash and cash equivalents and funds receivable are placed with financial institutions that management believes are of high credit quality. Our accounts receivable are derived from revenue earned from customers located in...

  • Page 91
    .... Funds receivable and funds payable 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 to their bank account...

  • Page 92
    ... transaction revenues are generated primarily from fees charged to users to connect Skype's VoIP product to traditional telecommunication networks. These fees are recognized when the service is provided. The majority of Communications segment transaction revenues are prepaid. We record customer...

  • Page 93
    ... contractual interest and fee rates. To drive traffic to our websites, we periodically provide incentives to our users such as percentage discounts off current purchases. The incentives used by our users are reported as a reduction of revenue. Product development costs Costs related to the planning...

  • Page 94
    ... effects of stock-based 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 deferred...

  • Page 95
    ... weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and restricted stock is reflected in diluted earnings per share by application of the treasury stock method. The calculation of diluted...

  • Page 96
    ... included in our Payments segment. Bill Me Later's service combines authentication, credit origination, funding, fulfillment, settlement, reporting and customer care into a single managed solution integrated into a merchant's existing payment platform. The rationale for acquiring Bill Me Later is to...

  • Page 97
    ... STATEMENTS - (Continued) amortized on a straight-line basis over the respective useful lives. Our preliminary allocation of the purchase price is summarized below (in thousands): Net liabilities assumed, net of cash acquired of $3,957 ...Goodwill ...Trade name ...User base ...Developed technology...

  • Page 98
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) at approximately $8.1 million. The fair value of StubHub stock options assumed was determined using a BlackScholes model. StubHub is an online marketplace that facilitates the resale of event tickets and is included within our ...

  • Page 99
    ... part of our strategic planning cycle conducted annually during our third quarter. Our estimates of future operating results for our Communications reporting unit are for an early stage business with limited financial history, as well as developing revenue models. These factors increase the risk of...

  • Page 100
    ... of our operating segments (in thousands): Marketplaces Year Ended December 31, 2006 Payments Communications Consolidated Net revenues from external customers ...Direct costs ...Direct contribution...Operating expenses and indirect costs of net revenues ...Income from operations ...Interest and...

  • Page 101
    ...,243 170,382 $1,273,625 Net revenues are attributed to U.S. and international geographies primarily based upon the country in which the seller, payment recipient, customer, Skype user's Internet protocol address, online property that generates advertising, or other service provider, as the case may...

  • Page 102
    ... two months. Restricted cash is held primarily in money market funds and interest bearing accounts for letters of credit related primarily to various lease arrangements. Effective during 2007, we began to account for our investment in MercadoLibre as an available-for-sale marketable equity security...

  • Page 103
    ... their use of intellectual property and technology and for certain corporate services provided by eBay and PayPal in the U.S. These charges are denominated in Euros and these forecasted inter-company transactions represent a foreign currency cash flow exposure. We purchase foreign currency exchange...

  • Page 104
    ... observable market values that would require a high level of judgment to determine fair value (level 3 assets). Our derivative instruments are valued using pricing models that take into account the contract terms as well as multiple inputs where applicable, such as equity prices, interest rate yield...

  • Page 105
    ... cash pooling arrangement. Our financial instruments, including accounts receivable, loans and interest receivable, funds receivable, accounts payable, funds payable, amounts due to customers and borrowings under our line of credit are carried at cost, which approximates their fair value because of...

  • Page 106
    ... by the end of the first quarter of 2009. A summary of the restructuring and other costs by segment recognized for the year ended December 31, 2008 are as follows (in thousands): Employee Severance and Benefits Facilities Total Marketplaces ...Payments ... $29,117 15,837 $44,954 $4,165 - $4,165...

  • Page 107
    ... percent to 0.45 percent or (ii) a formula based on the Bank of America, or Agent's, prime rate or on the federal funds effective rate. In August 2007, we entered into an amendment to our 2006 credit agreement. The amendment agreement increased the lender commitments and borrowing capacity under the...

  • Page 108
    ... to post listings offering genuine perfumes and cosmetics for sale on our websites. In June 2008, the Paris Court of Commerce ruled that eBay and eBay International AG were liable for failing to prevent the sale of counterfeit items on its websites that traded on plaintiffs' brand names and for...

  • Page 109
    ... identifiable information including name, address, resident registration number and some transaction and refund data (but not including credit card information or real time banking information). Approximately 141,000 users have sued IAC over this breach in several lawsuits in Korean courts and...

  • Page 110
    ... number and significance of these disputes and inquiries are increasing as our business expands and our company grows larger. Any claims or regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time...

  • Page 111
    ...and actual number of shares repurchased will depend on a variety of factors including corporate and regulatory requirements, price and other market conditions. The programs are intended to comply with the volume, timing and other limitations set forth in Rule 10b-18 under the Securities Exchange Act...

  • Page 112
    ...preceding calendar year. Employee Savings Plans We have a savings plan, which qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may contribute up to 25% of their annual salary, but not more than statutory limits. In 2006 and 2007, we contributed one dollar for each...

  • Page 113
    ...-based compensation expense that is included in each line item on our consolidated statement of income (in thousands): Year Ended December 31, 2006 2007 2008 Cost of net revenues ...Sales and marketing ...Product development ...General and administrative ...Restructuring ... ...$ 32,981 ...96,547...

  • Page 114
    ... intrinsic value was calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock. At December 31, 2008, 14.3 million options were in-the-money. The weighted average grant-date fair value of options granted during the years 2006, 2007 and...

  • Page 115
    ...fair value of awards vested under our stock plans was $2.5 million, $3.7 million and $4.6 million respectively, determined as of the date of vesting. Note 16 - Income Taxes: The components of pretax income in consolidated companies for the years ended December 31, 2006, 2007 and 2008 are as follows...

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    ... loss and credits ...Accruals and allowances ...Stock-based compensation ...Net unrealized (gains) losses ...Net deferred tax assets ...Valuation allowance ...Deferred tax liabilities: Acquisition-related intangibles ...Depreciation and amortization ...Available-for-sale securities ...Foreign...

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    ... for unrecognized tax benefits, and the increase in these liabilities in 2008 relates primarily to the allocations of revenue and costs among our global operations. Our liabilities for unrecognized tax benefits are recorded as deferred and other tax liabilities, net in our consolidated balance sheet...

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    ... quarter of 2007, we recorded a goodwill impairment charge of $1.4 billion related to our Communications reporting unit. See "Note 3 - Business Combinations, Goodwill and Intangible Assets" to the consolidated financial statements included in this report. In the fourth quarter of 2008, we recorded...

  • Page 119
    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 ...

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    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 19th day of ...

  • Page 121
    ...: /s/ Edward W. Barnholt Edward W. Barnholt Director By: /s/ Scott D. Cook Scott D. Cook Director By: /s/ Dawn G. Lepore Dawn G. Lepore Director By: /s/ Richard T. Schlosberg, III Richard T. Schlosberg, III Director Date: February 19, 2009 113

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