eBay 2009 Annual Report Download

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Annual
Report
2009

Table of contents

  • Page 1
    Annual Report 2009

  • Page 2

  • Page 3
    ... easier to send and receive payments across borders. In fact, cross-border trade now accounts for almost 25 percent of PayPal's net TPV. PayPal's merchant services division once again delivered strong growth both in the U.S. and worldwide. In 2009, for the first time, annual revenue and net TPV from...

  • Page 4
    ...local classifieds offerings with the core eBay business and eBay brand. We expect these initiatives to drive innovation in other markets in 2010. We accelerated innovation across eBay Inc. to connect buyers and sellers in new ways. In addition to PayPal opening its platform to third-party developers...

  • Page 5
    ...defined in Rule 12b-2 of the Exchange Act). Yes ' No È As of June 30, 2009, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $19,223,999,242 based on the closing sale price as reported on The Nasdaq Global Select Market. Indicate the number of...

  • Page 6

  • Page 7
    ...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 IV Exhibits and Financial Statement Schedules ... 49...

  • Page 8

  • Page 9
    ... the initial 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," "us" or "eBay" in this Annual Report on Form 10-K, we mean the current Delaware...

  • Page 10
    ... telephones. Our marketing services revenues are derived principally from the sale of advertisements, revenue sharing arrangements, classifieds fees and lead referral fees. Other revenues are derived principally from interest earned on certain PayPal customer account balances, interest and fees...

  • Page 11
    ... of our classifieds websites, as well as StubHub, Shopping.com, Half.com, and Rent.com. Our Marketplaces platforms earn revenue from, as the case may be, final value, listing, feature and subscription fees paid by sellers, lead referral fees, transaction fees and advertising fees. eBay.com Platform...

  • Page 12
    ... items that may be counterfeit or otherwise unauthorized. Customer Support: We devote significant resources to providing personalized, accurate 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...

  • Page 13
    ... to calculate shipping costs; Shipping Labels, which allows sellers to print certain postage and 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 currently provide these services directly or...

  • Page 14
    ... events. StubHub provides a marketplace dedicated solely to tickets and is designed to enable users to buy or sell their tickets in a secure, convenient and highly reliable environment. Buyers and sellers pay transaction fees to StubHub when tickets are bought and sold. Classifieds Websites...

  • Page 15
    ... online in approximately 190 markets worldwide) and Bill Me Later (which we acquired in November 2008, and which enables online U.S. merchants to offer, and U.S. consumers to obtain, through Bill Me Later's banking relationships, transactional credit at the point of sale). Our payment networks build...

  • Page 16
    ...through eBay.com or merchant websites, a buyer selects an item for purchase, chooses PayPal for payment and enters his or her email address and password to authorize the payment. The buyer chooses whether PayPal debits the money from the buyer's PayPal balance, credit card, Bill Me Later account (in...

  • Page 17
    ... revenues are earned from a suite of financial products. PayPal incurs funding costs on payments at varying levels depending on the source of the payment. Funding costs associated with credit card and debit card funded payments are significantly higher than bank account, Bill Me Later, or balance...

  • Page 18
    ... Bank, 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 or as a funding source in a qualified PayPal account on certain merchants in the U.S. who accept PayPal. Once established, customers can then manage...

  • Page 19
    ... from their PayPal accounts at ATMs, pay for offline purchases with funds from their PayPal account, and in the U.S. qualify to receive cash back on eligible purchases; PayPal Plus Credit Card and eBay MasterCard issued by GE Money Bank, which allow users to earn rewards on purchases made offline...

  • Page 20
    ... for use online and offline via the Student Card; and PayPal Money Market Fund, which allows participants to earn a yield on the funds in their PayPal account. Communications Our Communications segment was comprised of Skype. Skype is a global Internet communications company that offers a way for...

  • Page 21
    ... as technologies and services provided by others. We have developed intuitive user interfaces, customer tools and transaction processing, database and network applications that help enable our users to reliably and securely complete transactions on our sites. Our technology infrastructure simplifies...

  • Page 22
    ... forms of payment such as checks and money orders), on eBay.com in the U.S. for most categories of items; and recently implemented changes intended to drive more sales and improve seller efficiency, including, among others, the expansion of buyer incentives and loyalty programs, requiring sellers...

  • Page 23
    ... or restrict the Internet, ecommerce, online payments or online advertising; our ability to meet regulatory requirements as we expand the range and geographical scope of our services; the actions of our competitors, including the introduction of new sites, services, products and functionality; our...

  • Page 24
    ... the expectations of securities analysts and investors. In that event, the trading price of our common stock would almost certainly decline. We invest heavily in marketing and promotion, customer support, protection programs, technology and further development of the operating infrastructure for our...

  • Page 25
    ... customers in order to offer the Bill Me Later service. When a consumer makes a purchase using the Bill Me Later service, CIT Bank extends the credit to the consumer, funds the consumer loan at the point of sale and advances funds to the merchant. Bill Me Later subsequently purchases the receivable...

  • Page 26
    ... anticipate receiving in the future, communications alleging that certain items listed or sold through our service by our users infringe third-party copyrights, trademarks and trade names, or other intellectual property rights. See "Item 3 - Legal Proceedings" below. Although we have sought to work...

  • Page 27
    ... in the sale of infringing items, such as payment companies. To the extent that intellectual property rights owners bring legal action against PayPal based upon the use of PayPal's payment services in a transaction involving the sale of infringing items, including on our websites, our business...

  • Page 28
    ... sellers to use our sites without confirming the source of, and their legal rights to sell, the underlying goods. In addition, from time to time we have received significant media attention relating to the listing or sale of unlawful goods and stolen goods using our services. This negative publicity...

  • Page 29
    ... 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 or other payment methods. Similarly, Bill Me Later has from time to time received customer complaints...

  • Page 30
    ...fraud. In configuring its 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...

  • Page 31
    ... 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 32
    ... to follow credit card industry security standards, even if there is no compromise of customer information, we could incur significant fines or lose our ability to give customers the option of using credit cards to fund their payments or pay their fees. If we were unable to accept credit cards, our...

  • Page 33
    ... we derive from online advertising on our websites, either directly or indirectly. For example, retailers pay a fee to Shopping.com for online shoppers directed to their websites by Shopping.com. Rule changes made by search engines in 2008 disrupted traffic to our Shopping.com website, which in turn...

  • Page 34
    ... raised concerns relating to pricing, parallel imports, professional seller obligations, selective distribution networks, stolen goods, copyrights, trademarks and other intellectual property rights, and the liability of the provider of an Internet marketplace for the conduct of its users related to...

  • Page 35
    ... regulator to 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 EU countries. In addition, the EU Payments Service Directive, which...

  • Page 36
    ... or halt payments to local merchants conducted through the local banking partner. Such regulatory actions impacting local banking partner arrangements could impose substantial costs and involve considerable delay to the provision or development of PayPal services in that market. The Reserve Bank of...

  • Page 37
    ... 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 38
    ... bank accounts, and no fees when customers fund payment transactions from an existing PayPal account balance or use buyer credit issued by GE Money Bank. As of October 2009, eligible U.S. customers may also fund payment transactions through a loan originated by CIT Bank in the Bill Me Later service...

  • Page 39
    ...; difficulties in integrating with local payment providers, including banks, credit and debit card networks, and electronic fund transfer systems; differing levels of retail distribution, shipping, and Internet infrastructures; different employee/employer relationships and the existence of workers...

  • Page 40
    ..., and greater problems in collecting accounts receivable; potentially adverse tax consequences, including local taxation of our fees or of transactions on our websites; higher Internet service provider costs; different and more stringent user protection, data protection, privacy and other laws...

  • Page 41
    ...; declining employee morale and retention issues resulting from changes in, or acceleration of, compensation, 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...

  • Page 42
    ...Me Later as a payment funding option for transactions on eBay.com and on certain merchant websites that accept PayPal. Like other businesses with significant exposure to losses from consumer loans, the Bill Me Later service faces the risk that after Bill Me Later purchases the receivables related to...

  • Page 43
    ... forced 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 (VAT), goods and services tax, business tax, and gross receipt tax) to ecommerce businesses such as eBay and to...

  • Page 44
    ... in a year, and 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...

  • Page 45
    ... their infrastructure to support or facilitate our offerings, or by charging increased fees to us or our users to provide our offerings. 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...

  • Page 46
    ...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 that deliver goods sold...

  • Page 47
    ... of shopping comparison sites if manufacturers begin requiring more uniformity in product 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...

  • Page 48
    ... and payment; 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 49
    ...transactions on our localized UK website, and since October 2008, we have required sellers on eBay.com to accept one or more accepted payment methods (currently PayPal, credit or debit cards processed through Internet merchant accounts, ProPay, Moneybookers and Paymate) and no longer allow any forms...

  • Page 50
    ... on its licensure as 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 has offered free payments processing on transactions in an amount proportionate to...

  • Page 51
    ...network infrastructure to accommodate increased traffic or transaction volume or changes to our site functionality could harm our business. Adverse consequences could include unanticipated system disruptions, slower response times, degradation in levels of customer support, impaired quality of users...

  • Page 52
    ... to increase corporate tax revenues by taking an expansive view of corporate presence in order to attempt to impose corporate income taxes and other direct business taxes on companies that have no physical presence in their state. Companies that operate over the Internet, such as eBay, are a target...

  • Page 53
    ... our employees and contractors, and confidentiality agreements with parties with whom we conduct business in order to limit access to and disclosure of our proprietary information. Effective intellectual property protection may not be available in every country in which our products and services are...

  • Page 54
    .... ITEM 1B: UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2: PROPERTIES We own and lease various properties in the U.S. and 25 other countries around the world. We use the properties for executive and administrative offices, data centers, product development offices and customer service offices...

  • Page 55
    ... first half of 2010. 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...

  • Page 56
    ... personally 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 146,000 users have sued IAC over this breach in several lawsuits in Korean...

  • Page 57
    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 58
    ...00 2005 2006 2007 Year eBay S&P North American Technology Internet Index Nasdaq Composite Index S&P 500 Index 2008 2009 Issuer Purchases of Equity Securities In January 2008, our Board approved an additional stock repurchase program for $2.0 billion having no expiration date, giving us the ability...

  • Page 59
    ... 1, 2006, prior periods do not reflect stock-based compensation expense related to this new accounting standard. See "Note 17 - Benefit Plans" to the consolidated financial statements included in this report. (3) The Consolidated Statement of Income for the year ended December 31, 2007 includes...

  • Page 60
    ...solutions - PayPal (which enables individuals and businesses to securely, easily and quickly send and receive payments online in approximately 190 markets worldwide) and Bill Me Later. Our Communications segment, which consisted of Skype, enabled Internet communications calls between Skype users and...

  • Page 61
    ... telephones. Our marketing services revenues are derived principally from the sale of advertisements, revenue sharing arrangements, classifieds fees and lead referral fees. Other revenues are derived principally from interest earned on certain PayPal customer account balances, interest and fees...

  • Page 62
    ... in which the seller, payment recipient, customer, Skype user's Internet protocol address, website that displays advertising, or other service provider, as the case may be, is located. The following table sets forth, for the periods presented, the breakdown of net revenues by type, segment and...

  • Page 63
    ...closed items between users on eBay Marketplaces trading platforms during the period, regardless of whether the buyer and seller actually consummated the transaction. (5) Total dollar volume of payments, net of payment reversals, successfully completed through our Payments network or on Bill Me Later...

  • Page 64
    ... in PayPal's revenue from its existing customer base of merchants and an increase in the number of online merchants offering PayPal as a payment option as well as an increase in cross-border payments, which typically generate larger fees. Communications Net Transaction Revenues Communications net...

  • Page 65
    ... 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 and assessment fees, Bill Me Later related interest charges, employee compensation, contractor...

  • Page 66
    ... and expansion of our customer support and site operations due to growth in transaction volume. Payments cost of net revenues as a percentage of Payments net revenues during 2008 increased due primarily to growth in our Merchant Services net TPV and the inclusion of Bill Me Later (acquired November...

  • Page 67
    ...The increase in both dollars and as a percentage of revenue was due primarily to an increase in employee-related and consultant costs driven by increased investment in our top technology priorities: search, catalog, platform, and user experience. Product development expenses increased $105.9 million...

  • Page 68
    ... associated with our Bill Me Later business (acquired November 2008) and the expansion of eBay's Buyer Protection programs, partially offset by decreases in bad debt expense as well as improvements to PayPal's fraud and credit loss rates. We continue to expect our provision for transaction and loan...

  • Page 69
    ...began the consolidation of certain customer service facilities in North America and Europe to streamline our operations and deliver better and more efficient customer support to our users, which will potentially impact approximately 1,100 employees. In connection with this consolidation, we estimate...

  • Page 70
    ...our credit agreement and certain accrued contingencies. Included in cost of net revenues, and income from other miscellaneous transactions not related to our primary operations such as the gain on sale of Skype in 2009. Interest and other income, net excludes interest related to Bill Me later, which...

  • Page 71
    ... provision for transaction and loan losses. Non-cash items in 2009 and 2007 also included a $1.4 billion gain on the sale of Skype and a $1.4 billion goodwill impairment charge (including a $530.3 million earn out settlement payment discussed below), respectively. Cash paid for income taxes in 2007...

  • Page 72
    ... 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. Credit Agreement In...

  • Page 73
    .... See "Note 18 - Income Taxes" to the consolidated financial statements included in this report. Our available cash and cash equivalents are held in bank deposits and money market funds. We actively monitor the third-party depository institutions and money market funds that hold our cash and...

  • Page 74
    ... requires us to expand our occupied space or exit an office facility early. Purchase obligation amounts include minimum purchase commitments for advertising, capital expenditures (computer equipment, software applications, engineering development services, construction contracts) and other goods...

  • Page 75
    ... to our payment processors in the event of certain third-party claims or card association fines against the processor arising out of conduct by PayPal or PayPal customers. In connection with the sale of Skype, we made certain customary warranties to the buyer in the purchase agreement. Our liability...

  • Page 76
    ...circumstances at each balance sheet date and are subject to change based upon new information and future events. From time to time, we are involved in disputes that arise in the ordinary course of business. We are currently involved in certain legal proceedings as discussed in "Item 1A: Risk Factors...

  • Page 77
    ... in our consolidated statement of income or against additional paid-in-capital in our consolidated balance sheet to the extent any tax benefits would have otherwise been allocated to equity. Our U.S. businesses generate sufficient cash flow to fully fund their current operating requirements, and we...

  • Page 78
    ..., the selling price is fixed or determinable, and collectability is reasonably assured. We may enter into certain revenue transactions that involve multiple element arrangements (arrangements with more than one deliverable). We also may enter into arrangements to purchase goods and/or services from...

  • Page 79
    ... investment portfolio was held in bank deposits and money market funds. As such, changes in interest rates will impact interest income. Additionally, changes in interest rates will impact our interest sensitive credit agreement and accordingly, impact interest expense or cost of net revenues. As of...

  • Page 80
    ... exchange exposure management program is to identify material foreign currency exposures and to manage these exposures to minimize the potential effects of currency fluctuations on our reported consolidated cash flow and results of operations. International net revenues result from transactions...

  • Page 81
    ... 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 inter-company transactions represent a foreign currency cash flow exposure. We purchase foreign exchange...

  • Page 82
    ...internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Annual Report on Form 10-K. ITEM 9B: OTHER INFORMATION Not applicable. 74

  • Page 83
    ...RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Incorporated by reference from our Proxy Statement for our 2010 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2009. ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES...

  • Page 84
    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 85
    .... Form of Restricted Stock Unit Agreement (and Performance-Based Restricted Stock Unit Agreement) under Registrant's 1998 Equity Incentive Plan. Registrant's Amended and Restated 1998 Employee Stock Purchase Plan. Registrant's 1998 Directors Stock Option Plan, as amended. Registrant's 1999 Global...

  • Page 86
    ...Filed with this 10-K Form Incorporated by Reference File No. Date Filed 10.9+ 10.10+ 10.11+ 10.12+ 10.13+ 10.14+ 10.15+ 10.16+ 10.17+ 10.18+ Form of Stock Option Agreement under Registrant's 1999 Global Equity Incentive Plan. Form of Restricted Stock Unit Agreement under Registrant's 1999 Global...

  • Page 87
    ...by Reference Form File No. Date Filed 10.26 Second Amendment Agreement dated September 5, 2008, by and among Registrant, Bank of America, N.A., as Administrative Agent, and other lenders named from time to time therein. Statement regarding computation of ratio of earnings to fixed charges. List of...

  • Page 88
    ...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 perform...

  • Page 89
    ... STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ...Funds payable and amounts due to customers ...Accrued expenses and other current liabilities ...Deferred revenue and customer advances ...Income taxes payable ...Borrowings from credit agreement ...Total current liabilities ...Deferred...

  • Page 90
    eBay Inc. CONSOLIDATED STATEMENT OF INCOME Year Ended December 31, 2007 2008 2009 (In thousands, except per share amounts) Net revenues ...Cost of net revenues ...Gross profit ...Operating expenses: Sales and marketing ...Product development ...General and administrative ...Provision for ...

  • Page 91
    eBay Inc. CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME Year Ended December 31, 2007 2008 (In thousands) 2009 Net income ...Other comprehensive income: Foreign currency translation ...Unrealized gains (losses) on investments ...Unrealized (losses) gains on cash flow hedges ...Estimated tax (...

  • Page 92
    eBay Inc. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 2007 Year Ended December 31, 2008 2009 (In thousands) Common stock: Balance, beginning of year ...Common stock issued ...Balance, end of year ...Additional paid-in-capital: Balance, beginning of year ...Common stock and stock-based awards ...

  • Page 93
    ... stock, net ...Excess tax benefits from stock-based compensation ...Tax withholdings related to net share settlements of restricted stock awards and units ...Repayment of acquired line of credit ...Net borrowings (repayments) under credit agreement ...Funds receivable and customer accounts ...Funds...

  • Page 94
    ... solutions PayPal (which enables individuals or businesses to securely, easily and quickly send and receive payments online) and Bill Me Later (which we acquired in November 2008 and which enables online U.S. merchants to offer, and U.S. consumers to obtain, transactional credit at the point of sale...

  • Page 95
    ... securities and time deposits are classified as available-for-sale and are reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of related estimated tax provisions...

  • Page 96
    ... are generated with banks or credit card companies that management believes are of high credit quality. Cash and cash equivalents and customer accounts are placed with financial institutions that management believes are of high credit quality. Our accounts receivable are derived from revenue earned...

  • Page 97
    ... payment networks. When customers fund their account using their bank account or credit card, or withdraw money to their bank account or through a debit card transaction, there is a clearing period before the cash is received or settled, usually one to three business days for U.S. transactions...

  • Page 98
    ...acquisitions of entities accounted for using the purchase method of accounting are estimated by management based on the fair value of assets received. Identifiable intangible assets are comprised of purchased customer lists and user base, trademarks and trade names, developed technologies, and other...

  • Page 99
    ... to the merchant's website. Other revenues are derived principally from contractual arrangements with third parties that provide services to eBay and PayPal users and interest earned from banks on certain PayPal customer account balances and interest and fees earned on the Bill Me Later portfolio of...

  • Page 100
    ... 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 tax liabilities and assets for the future tax consequences of events that...

  • Page 101
    ...and disclosures about credit-risk-related contingent features in derivative agreements. The adoption of this accounting guidance did not have a material impact on our consolidated financial statements. On January 1, 2009, we adopted new accounting guidance for assets acquired and liabilities assumed...

  • Page 102
    ...guidance related to the revenue recognition of multiple element arrangements. The new guidance states that if vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, companies will be required to develop a best estimate of the selling price...

  • Page 103
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In January 2010, the FASB issued new accounting guidance related to the disclosure requirements for fair value measurements and provides clarification for existing disclosures requirements. More specifically, this update will require ...

  • Page 104
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) a cash tender offer resulting in a total cash purchase price of approximately $1.2 billion and assumed Gmarket outstanding stock options. Subsequent to the acquisition date, we acquired additional securities related to the ...

  • Page 105
    ... intangible assets acquired is three years for the developed technology and five years for the trade name and user base. The results of operations of Bill Me Later for periods prior to our acquisition were not material to our consolidated statement of income and, accordingly, pro forma results...

  • Page 106
    ... trade name and developed technology and five years for the user base. The results of operations of StubHub for periods prior to our acquisition were not material to our consolidated statement of income and, accordingly, pro forma results of operations have not been presented. Note 4 - Sale of Skype...

  • Page 107
    ... agreements, including agreements relating to intellectual property cross-licenses, management services, transitional services and office space, and tax cooperation. Skype entered into a new commercial agreement with an affiliate of PayPal. The sale resulted in the removal of all Skype related...

  • Page 108
    ... 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 in intangible assets during the year ended...

  • Page 109
    ...): Marketplaces Year Ended December 31, 2007 Payments Communications Consolidated Net transaction revenues ...Marketing services and other revenues ...Net revenues from external customers ...Direct costs ...Direct contribution ...Operating expenses and indirect costs of net revenues ...Income from...

  • Page 110
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Marketplaces Year Ended December 31, 2009 Payments Communications Consolidated Net transaction revenues ...Marketing services and other revenues ...Net revenues from external customers ...Direct costs ...Direct contribution ......

  • Page 111
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 7 - Investments: At December 31, 2008 and 2009, the fair value of short and long-term investments classified as available for sale are as follows (in thousands): December 31, 2008 Gross Amortized Cost Gross Unrealized Gains Gross ...

  • Page 112
    ...duration of approximately 13 months. Restricted cash is held primarily in money market funds and interest bearing accounts for letters of credit related primarily to various lease arrangements. The estimated fair values of short and long-term investments classified by date of contractual maturity at...

  • Page 113
    ... as multiple inputs where applicable, such as equity prices, interest rate yield curves, option volatility and currency rates. Our derivative instruments are short-term in nature, typically one month to one year in duration. We maintain our customer account balances in interest bearing bank deposits...

  • Page 114
    ... of Derivative Contracts on the Consolidated Statement of Income: The following table provides the location in our financial statements of the recognized gains or losses related to our derivative instruments (in thousands): Year Ended December 31, 2009 Foreign exchange contracts designated as cash...

  • Page 115
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 10 - Balance Sheet Components: December 31, 2008 2009 (in thousands) Other current assets: Prepaid expenses ...Deferred tax assets, net ...Prepaid income taxes ...Derivatives ...Other ... $ 99,735 130,908 60,135 71,149 98,771 $...

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    ...began the consolidation of certain customer service facilities in North America and Europe to streamline our operations and deliver better and more efficient customer support to our users. As previously announced, the consolidation will potentially impact approximately 1,100 employees. In connection...

  • Page 117
    ... in the credit agreement. Shelf Registration Statement At December 31, 2009, we had an effective shelf registration statement on file with the Securities and Exchange Commission that allows us to issue various types of debt securities, such as fixed or floating rate notes, U.S. dollar or foreign...

  • Page 118
    ... 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...

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    ... personally 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 146,000 users have sued IAC over this breach in several lawsuits in Korean...

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    ... to our payment processors in the event of certain third-party claims or card association fines against the processor arising out of conduct by PayPal or PayPal's customers. In connection with the sale of Skype, we made certain customary warranties to the buyer in the purchase agreement. Our...

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    .... 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. In addition to the above, we have withheld shares from employees to satisfy tax obligations in conjunction with share-based compensation plans. 113

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    ... half will vest one year later. Stock Option Exchange Program On August 10, 2009, the Company launched a one-time stock option exchange program (the "Program") pursuant to which eligible employees were able to exchange certain outstanding stock options with an exercise price greater than or equal...

  • Page 123
    ...year from the date of grant, and at a rate of 2.08% per month thereafter. If the services of the director are terminated at any time, all rights to the unvested deferred stock units shall also terminate. In addition, directors may elect to receive, in lieu of annual retainer and committee chair fees...

  • Page 124
    ... that is included in each line item on our consolidated statement of income (in thousands): Year Ended December 31, 2007 2008 2009 Cost of net revenues ...Sales and marketing ...Product development ...General and administrative ...Restructuring ...Total stock-based compensation expense ... $ 37,009...

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    ... vested under our stock plans was $3.7 million, $4.6 million and $0.9 million respectively, determined as of the date of vesting. The nonvested shares are subject to repurchase rights. Note 18 - Income Taxes: The components of pretax income in consolidated companies for the years ended December 31...

  • Page 126
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The provision for income taxes is composed of the following (in thousands): 2007 Year Ended December 31, 2008 2009 Current: Federal ...State and local ...Foreign ...Deferred: Federal ...State and local ...Foreign ... $ 402,235 38,087 ...

  • Page 127
    ... in the form of dividends or otherwise, we would be subject to U.S. income taxes (subject to an adjustment for foreign tax credits). It is not practicable to determine the income tax liability that might be incurred if these earnings were to be distributed. The Company enjoys "tax holidays" in...

  • Page 128
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) On January 1, 2007, we adopted new accounting guidance as issued by the FASB related to unrecognized tax benefits which resulted in a $145,000 adjustment to beginning retained earnings. The following table reflects changes in the ...

  • Page 129
    ... $2,370,932 $1,700,237 $1,354,906 $ $ 1.05 1.02 1,295,541 1,322,686 (1) The Consolidated Statement of Income for the year ended December 31, 2009 includes a $1.4 billion gain on the sale of Skype. See "Note 4 - Sale of Skype" to the consolidated financial statements included in this report. 121

  • Page 130
    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 131
    ... 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 17th day of February, 2010. eBay Inc...

  • Page 132
    ...: /S/ DAWN G. LEPORE Dawn G. Lepore Director By: /S/ DAVID M. MOFFETT David M. Moffett Director By: /S/ RICHARD T. SCHLOSBERG, III Richard T. Schlosberg, III Director By: /S/ THOMAS J. TIERNEY Thomas J. Tierney Director Date: February 17, 2010 124

  • Page 133
    .... Form of Restricted Stock Unit Agreement (and Performance-Based Restricted Stock Unit Agreement) under Registrant's 1998 Equity Incentive Plan. Registrant's Amended and Restated 1998 Employee Stock Purchase Plan. Registrant's 1998 Directors Stock Option Plan, as amended. Registrant's 1999 Global...

  • Page 134
    ... by Reference Form File No. Date Filed 10.9+ 10.10+ 10.11+ 10.12+ 10.13+ 10.14+ 10.15+ 10.16+ 10.17+ 10.18+ Form of Stock Option Agreement under Registrant's 1999 Global Equity Incentive Plan. Form of Restricted Stock Unit Agreement under Registrant's 1999 Global Equity Incentive Plan. Registrant...

  • Page 135
    ...by Reference Form File No. Date Filed 10.26 Second Amendment Agreement dated September 5, 2008, by and among Registrant, Bank of America, N.A., as Administrative Agent, and other lenders named from time to time therein. Statement regarding computation of ratio of earnings to fixed charges. List of...

  • Page 136
    ... and schedules to the Share Purchase Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Registrant will furnish copies of any annexes or schedules to the Securities and Exchange Commission upon request. XBRL information is furnished and not filed for...

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    ...% recycled content, from 100% post consumer waste, is processed chlorine free, and is manufactured with wind power. It is printed with soy inks, which are easier to recycle and are more environmentally friendly. eBay Inc., 2145 Hamilton Avenue San Jose, California 95125 http://investor.ebayinc.com