eBay 2008 Annual Report Download - page 37

• the need to implement controls, procedures and policies appropriate for a larger public company at
companies that prior to acquisition had lacked such controls, procedures and policies;
• in the case of foreign acquisitions, the need to integrate operations across different cultures and languages
and to address the particular economic, currency, political, and regulatory risks associated with specific
countries;
• in some cases, the need to transition operations, users, and customers onto our existing platforms; and
• liability for activities of the acquired company before the acquisition, including violations of laws, rules and
regulations, commercial disputes, tax liabilities and other known and unknown liabilities.
Moreover, we may not realize the anticipated benefits of any or all of our acquisitions, or may not realize them
in the time frame expected. For example, in connection with the Skype transaction, we recorded a goodwill
impairment charge of approximately $1.4 billion in our financial statements during 2007. Future acquisitions or
mergers may require us to issue additional equity securities, spend our cash, or incur debt, liabilities, amortization
expenses related to intangible assets or write-offs of goodwill, any of which could reduce our profitability and harm
our business.
In addition, we have made certain investments, including through joint ventures, in which we have a minority
equity interest and lack management and operational control. These investments may involve risks. For example,
the controlling joint venture partner in a joint venture investment may have business interests, strategies or goals
that are inconsistent with ours, and business decisions or other actions or omissions of the controlling joint venture
partner or the joint venture company may result in harm to our reputation or adversely affect the value of our
investment in the joint venture.
Bill Me Later will expose us to new risks.
We acquired Bill Me Later, a company that provides transaction-based credit, in late 2008. Upon acquiring Bill
Me Later, we became exposed to new risks.
Bill Me Later is not a chartered financial institution, and relies on CIT Bank to extend 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 to the consumer loan extended by CIT Bank. Although CIT
Bank continues to own each customer account, Bill Me Later owns the related receivable and is responsible for all
servicing functions related to the account. Any termination or interruption of CIT Bank’s services to us, including
due to the suspension or termination of CIT Bank’s banking charter, a regulatory challenge to the relationship
between CIT Bank and Bill Me Later or the termination of our commercial relationship with CIT Bank for any
reason, could materially and adversely affect our ability to offer the Bill Me Later service. Under those circum-
stances, we would likely be required to either reach a similar arrangement with another chartered financial
institution, which may not be available on favorable terms, if at all, or to obtain our own bank charter, which would
be a time-consuming and costly process and would subject us to a number of additional laws and regulations. Bill
Me Later also relies on third-party merchant processors and payment gateways to process transactions using the Bill
Me Later service. Most of the transaction volume by dollar amount through the Bill Me Later service is currently
settled through the facilities of a single vendor. Any disruption to our payment processing and gateway services
would adversely affect the Bill Me Later service.
We currently fund the origination of receivables related to Bill Me Later accounts through free cash flow
generated from our portfolio of businesses and from our existing line of credit. As a result of the bankruptcy of
Lehman Brothers Holdings Inc., our available line of credit was effectively reduced by Lehman Brothers
Commercial Bank’s $160 million commitment. If other financial institutions that have extended credit commit-
ments to us are adversely affected by U.S. and global economic conditions, they may become unable to fund
borrowings under their credit commitments to us. Our ability to securitize receivables related to Bill Me Later
accounts is dependent upon, among other things, conditions in the structured finance markets, which have been
subject to recent disruptions in the credit industry, resulting in very limited liquidity for securitization purposes. If
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