eBay 2010 Annual Report Download

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Annual
Report
2010

Table of contents

  • Page 1
    Annual Report 2010

  • Page 2
    ... of our business, with a focus on trust, selection, value and user experience. We made progress on all fronts last year. To help customers feel more confident buying bigger-ticket items, and buying more often on eBay, we promoted eBay Buyer Protection and eBay Top-Rated Sellers, who provide the best...

  • Page 3
    ... enables us to provide consumers with real-time local shopping and inventory checking; and Critical Path Software will help us deliver innovative mobile applications on a faster release schedule. Connecting buyers and sellers anywhere, anytime, any device We built aggressively on our early lead in...

  • Page 4
    ... . Commission file number 000-24821 eBay Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 77-0430924 (I.R.S. Employer Identification Number) 2145 Hamilton Avenue San Jose, California (Address of principal executive...

  • Page 5
    ... ...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...

  • Page 6
    ...completed 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...

  • Page 7
    payment processing services and, until the sale of Skype on November 19, 2009, fees charged to users to connect Skype's Internet communications products to traditional fixed-line and mobile telephones. Our marketing services revenues are derived principally from the sale of advertisements, revenue ...

  • Page 8
    ... products, including through our "Daily Deal" program, where we offer multiple deeply discounted deals from sellers every day, and our "Fashion Vault" program, which offers limitedtime, online sales of brand-new designer fashions and accessories. Through our eBay Bucks rewards program, all buyers...

  • Page 9
    ... comments by users who have conducted business with that user. The Feedback Forum requires feedback to be related to specific transactions and provides an easy tool for users to match specific transactions with the user names of their trading partners. This information is recorded in a profile that...

  • Page 10
    ...; eBay verified third party applications, which are designed to help sellers manage listings, track finances and research seasonal trends and prices; PayPal, which facilitates the online payment of funds; and Bill Me Later, which provides our U.S. buyers with consumer credit at the point of sale...

  • Page 11
    ... the purchase price of the item, plus original shipping costs, for a limited time period from the date of the transaction, and includes a new, streamlined online interface to help buyers and sellers navigate their way through the process. Adjacent Marketplaces Platforms and Services StubHub StubHub...

  • Page 12
    ..., Fashion and Daily Deals. We also maintain a mobile version of our eBay.com website for use with internetenabled phones. Marketplaces Growth Strategy eBay strives to offer a wide variety of inventory ranging from new in-season through end-of-life products from different types of sellers in a broad...

  • Page 13
    ... bank partners around the world, buyers can use their local payment method of choice, no matter where the seller is located. In addition, PayPal offers a payment gateway service that provides merchants that already have a payment card merchant account with a secure connection from their online store...

  • Page 14
    ...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, debit or other payment card, Bill Me Later account...

  • Page 15
    ... processes are used for payment card accounts and in the limited number of countries where PayPal offers bank funding. In certain cases specific to local markets, bank funded transactions are permitted up to set limits before additional verification is required. Withdrawing Money Each account...

  • Page 16
    ... the most secure method of payment on the Internet, enhancing our product offerings for our merchants and utilizing multiple sales channels. To establish PayPal and Bill Me Later as the online and mobile payment solutions of choice, we intend to continue focusing on increased user adoption and usage...

  • Page 17
    ...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 or using PayPal, as well as a PayPal Credit Card offered to U.K. users...

  • Page 18
    ... segment, our users may choose to pay through a variety of alternative means, including credit and debit cards, automated clearing house and bank wires, other online payment services, offline payment methods such as cash, check or money order and using mobile phones. To compete effectively, we...

  • Page 19
    ... 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 20
    ... offered by competitive Internet merchants; our ability to reduce the loss of active buyers and sellers and increase activity of the users of our Marketplaces business, especially with respect to our top buyers and sellers; changes to our use of advertising on our sites, including changes in ad...

  • Page 21
    ...relating to the maintenance and expansion of our businesses, operations, and infrastructure; our ability to comply with the requirements of entities whose services are required for our operations, such as credit card networks and banks; the cost and availability of online and traditional advertising...

  • Page 22
    ... norm for, and the expected level of service from, Internet ecommerce websites has significantly increased, due to, for example, improved user experience, greater ease of buying goods, lower (or no) shipping costs, faster shipping times and more favorable return policies. If we are unable to change...

  • Page 23
    ..., 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. A lawsuit has been filed against Bill Me Later, PayPal and eBay and is pending in the...

  • Page 24
    ... Wangfuyi Information Technology Ltd., which is licensed as an Internet Content Provider and operates a payments service only for Chinese customers and only for transactions denominated in Chinese currency. The People's Bank of China (PBOC) has recently enacted regulations to establish a new type of...

  • Page 25
    ... accounts, and has also stopped offering certain commercial payments between Indian buyers and Indian sellers. In November 2010, the Reserve Bank of India issued guidelines to Indian banks on the requirements for processing export-related transactions for online payment gateway service providers...

  • Page 26
    ... lawsuits contain allegations related to violations of aspects of the Electronic Fund Transfer Act and Regulation E and violations of a previous settlement agreement related to Regulation E, and/or allege that PayPal improperly held users' funds or otherwise improperly limited user's accounts. These...

  • Page 27
    ... our business. We have received in the past, and we 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...

  • Page 28
    ... to sell, the underlying goods. In addition, from time to time we have received significant media attention relating to the listing or sale of illegal goods and stolen goods using our services. This negative publicity could damage our reputation, diminish the value of our brand names and make users...

  • Page 29
    ... transactions on our localized Australian website and precluding sellers from imposing a surcharge or any other fee for accepting PayPal or other payment methods. Other regulators have requested information concerning PayPal's limitations of customer accounts. Similarly, Bill Me Later has from time...

  • Page 30
    ... to contact the seller directly and, if they were unable to resolve the issue, to start the resolutions process online via PayPal's resolution center. We have transitioned to a new, on-eBay resolutions process provided by eBay customer support, which now serves as the primary entry point for buyers...

  • Page 31
    ... the caption "Changes to our dispute resolution process could increase our costs and loss rate." Our limited eBay and PayPal buyer protection programs represent the means by which we compensate users who believe that they have been defrauded, have not received the item that they purchased, or have...

  • Page 32
    ... application of laws of multiple jurisdictions (e.g., the jurisdiction of the buyer, the seller, and/or the location of the item being sold), or any other factors that impose restrictions on, or increase the costs of, purchasing, selling or shipping goods across national borders (including customs...

  • Page 33
    ... number of our users authorize us to bill their credit card accounts directly for all transaction fees charged by us. PayPal's users routinely provide credit card and other financial information. We rely on encryption and authentication technology licensed from third parties to provide the security...

  • Page 34
    ... 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 35
    ...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 those and other issues. In...

  • Page 36
    ..., which enable PayPal's acceptance of credit cards and debit cards (including some types of prepaid cards). As a result, PayPal must rely on banks or other payment processors to process transactions, and must pay fees for this service. From time to time, payment card networks have increased, and may...

  • Page 37
    ... when customers fund payments with debit cards, nominal fees when customers fund payment transactions by electronic transfer of funds from 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...

  • Page 38
    ...to 22 hours. In November 2009, technical systems issues resulted in eBay.com users being unable to search for listed items for a period of several hours. Our PayPal website has suffered intermittent unavailability for periods as long as five days, most recently for approximately two hours in October...

  • Page 39
    ... 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; seasonal reductions in business...

  • Page 40
    ... the businesses to issues related to integration and administration, particularly given the number, size and varying scope of our recent acquisitions; declining employee morale and retention issues resulting from changes in, or acceleration of, compensation, or changes in management, reporting...

  • Page 41
    ... Later service. The Bill Me Later service is offered to a wide range of consumers, and the financial success of this business depends on the ability of the issuing bank of the Bill Me Later credit products to manage credit risk related to those products. The lender extends credit using Bill Me Later...

  • Page 42
    ...institution issuing the Bill Me Later credit products) will increase as we begin to enable qualified buyers with a PayPal account to use Bill Me Later as a payment funding option for transactions on eBay.com and on certain merchant websites that accept PayPal. We purchase the receivables relating to...

  • Page 43
    ... coupons and incentives available on our sites should not be deducted when computing taxes on our fees. Should any new taxes become applicable to our fees or if the taxes we pay are found to be deficient, our business could be harmed. We do not collect taxes on the goods or services sold by users...

  • Page 44
    ..., 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 to take such actions or are selling products designed to...

  • Page 45
    ... charging higher prices, these ticketing service companies have also imposed additional restrictions on transferability for these types of tickets, such as requiring customers to pick up these tickets at will-call with the purchasing credit card. To the extent that event tickets issued in this...

  • Page 46
    ... 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 on our platform, among others. In some cases we have contractual agreements...

  • Page 47
    ... online sites at nominal cost using commercially available software or partnering with any one of a number of successful ecommerce companies. Moreover, online and offline business increasingly are competing with each other. Consumers who purchase or sell goods and services through our Marketplaces...

  • Page 48
    affect the utility of shopping comparison sites if manufacturers limit variation 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 49
    ... for online shopping, and as the costs of operating an online store continue to decline, online sellers may increasingly sell goods through multiple channels, which could reduce the number and value of transactions these sellers conduct through our sites. PayPal The markets for PayPal's product are...

  • Page 50
    ..., 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 certain advertising spending with Google. Competing services tied to established banks and...

  • Page 51
    ... users in the U.K. to offer PayPal as a payment alternative on most transactions on our localized U.K. 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...

  • Page 52
    ... to accommodate the increasing number of transactions that must be billed on our and our subsidiaries' websites would harm our business and our ability to collect revenue. Customer Service. We continue to focus on providing better and more efficient customer support to our users. We intend to...

  • Page 53
    ... 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 unable to support such demands. In addition, increasing numbers of users, increasing bandwidth requirements, or...

  • Page 54
    ... 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 55
    ... 1B: UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2: PROPERTIES We own and lease various properties in the U.S. and 29 other countries around the world. We use the properties for executive and administrative offices, data centers, product development offices and customer service offices. As of...

  • Page 56
    ... products listed on our websites by third parties, alleged misuse of trademarks in listings, alleged violations of selective distribution channel laws, alleged violations of parallel import laws, alleged non-compliance with consumer protection laws or in connection with paid search advertisements...

  • Page 57
    ... 2008 data breach involving 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 147,000 users have sued IAC over this breach in...

  • Page 58
    ... 21, 2011, there were approximately 4,951 holders of record of our common stock, although we believe that there are a significantly larger number of beneficial owners of our common stock. Dividend Policy We have never paid cash dividends on our stock and do not anticipate paying cash dividends in...

  • Page 59
    .../31/10 S&P North America Technology Internet Index Nasdaq Composite Index Issuer Purchases of Equity Securities Stock repurchase activity during the three months ended December 31, 2010 was as follows: Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value of...

  • Page 60
    ...$2.0 billion stock repurchase program approved in September 2010. Our stock repurchase program may be limited or terminated at any time without prior notice, and the timing and actual number of shares repurchased depends on a variety of factors, including corporate and regulatory requirements, price...

  • Page 61
    ... date of sale. For a summary of recent significant acquisitions and the sale of Skype, please see "Note 3 - Business Combinations" and "Note 4 - Skype Related Transactions" to the consolidated financial statements included in this report. (2) The Consolidated Statement of Income for the year ended...

  • Page 62
    ... the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans or intentions (such as those relating to future business or financial results, new features or services, or management strategies...

  • Page 63
    ... Marketplaces trading platforms), fees paid by merchants for payment processing services and, until the sale of Skype on November 19, 2009, fees charged to users to connect Skype's Internet communications products to traditional fixed-line and mobile telephones. Our marketing services revenues are...

  • Page 64
    ...country in which the seller, payment recipient, customer, website that displays advertising, other service provider or, until the sale of Skype on November 19, 2009, the Skype user's Internet protocol address, as the case may be, is located. Percent Percent Change Change Year Ended December 31, from...

  • Page 65
    ...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 66
    ... of rule changes made in the third quarter of 2008 by third-party search engines that adversely affected click-though traffic to retailers from our Shopping.com website and reduced associated fees, as well as a decline in interest income earned on certain PayPal customer account balances resulting...

  • Page 67
    ...84,905 3% Cost of Net Revenues Cost of net revenues consists primarily of costs associated with payment processing, customer support and site operations and Skype telecommunications (through November 2009). Significant components of these costs include bank transaction fees, credit card interchange...

  • Page 68
    ... Online marketing expenses represent traffic acquisition costs in various channels such as paid search, affiliates marketing and display advertising. Offline advertising includes brand campaigns, buyer/seller communications and general public relations expenses. Sales and marketing expense increased...

  • Page 69
    ... to 2009. The increase was due primarily to an increase in employee-related and consultant costs driven by increased investment in our top technology priorities (search, catalog, mobile, platform, and user experience) and the inclusion of a full fiscal year of costs attributable to Gmarket (acquired...

  • Page 70
    ... years. Amortization of acquired intangible assets is also impacted by our sales of assets and businesses and timing of acquired intangible assets becoming fully amortized. See "Note 5 - Goodwill and Intangible Assets" to the consolidated financial statements included in this report. Amortization...

  • Page 71
    ... under our credit agreement and on our outstanding commercial paper and debt securities and certain accrued contingencies. Interest and other income (expense), net excludes interest expense related to Bill Me Later, which is included in cost of net revenues. Interest and other income (expense), net...

  • Page 72
    ... long-term assets, stock-based compensation and the provision for transaction and loan losses. Non-cash items in 2009 also included a $1.4 billion gain on the sale of Skype. The decrease in cash provided by operating activities in 2010 compared to 2009 was due primarily to an increase in cash paid...

  • Page 73
    ... with the financial covenants in the credit agreement. Shelf Registration Statement and Long-Term Debt At December 31, 2010, 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...

  • Page 74
    ... that, among other things, limit our ability to incur, assume or guarantee debt secured by liens on specified assets or enter into sale and lease-back transactions with respect to specified properties, and also includes customary events of default. Commercial Paper Program. In November 2010, we...

  • Page 75
    ...equipment, software applications, engineering development services, construction contracts) and other goods and services that were entered into through our ordinary course of business. As we are unable to reasonably predict the timing of settlement of liabilities related to unrecognized tax benefits...

  • Page 76
    ...in our consolidated balance sheets. These funds include funds held on behalf of U.S. customers that are deposited in bank accounts insured by the Federal Deposit Insurance Corporation (subject to applicable limits) and funds that U.S. customers choose to invest in the PayPal Money Market Fund, which...

  • Page 77
    ... associated with our accounts receivable balance, PayPal transaction loss expense, and loan reserves associated with our Bill Me Later principal loan receivable balance, as well as our losses resulting from our eBay and PayPal customer protection programs. Provisions for these items represent our...

  • Page 78
    .... We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. We file annual income tax returns in multiple taxing jurisdictions around the world. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it...

  • Page 79
    ...enter into certain revenue transactions, primarily related to advertising contracts, that are considered multiple element arrangements (arrangements with more than one deliverable). We also may enter into arrangements to purchase goods and/or services from certain customers. As a result, significant...

  • Page 80
    ... many factors when estimating forfeitures, including employee class and historical experience. Recent Accounting Pronouncements See "Note 1 - The Company and Summary of Significant Accounting Policies" to the consolidated financial statements included in this report, regarding the impact of certain...

  • Page 81
    ... intellectual property and technology and for certain corporate services provided by eBay and by PayPal. These charges are generally denominated in Euros and these forecasted inter-company transactions represent a foreign currency cash flow exposure. We purchase foreign exchange contracts, generally...

  • Page 82
    ... 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 rate sensitive credit agreement and accordingly, impact interest expense or cost of net revenues. As of...

  • Page 83
    ...internal control over financial reporting as of December 31, 2010 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. 78

  • Page 84
    ... AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Incorporated by reference from our Proxy Statement for our 2011 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the year ended December 31, 2010. ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES Incorporated...

  • Page 85
    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 86
    ... Incorporated by Reference File No. Date Filed 2.01 Share Allocation and Tender Offer Agreement, dated as of April 16, 2009, by and among Registrant, eBay KTA (UK). Ltd. and Gmarket Inc. Share Purchase Agreement, dated as of April 16, 2009, by and among Registrant, eBay KTA (UK). Ltd. and Gmarket...

  • Page 87
    ...Reference File No. Date Filed 10.05+ 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...

  • Page 88
    ... and among Registrant, Bank of America, N.A., as Administrative Agent, and other lenders named from time to time therein. Separation Agreement dated October 20, 2010 between Lorrie Norrington and Registrant. Statement regarding computation of ratio of earnings to fixed charges. List of Subsidiaries...

  • Page 89
    ... a management contract or compensatory plan or arrangement ++ Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission. * The annexes and schedules to the Share Purchase Agreement have...

  • Page 90
    ...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 91
    eBay Inc. CONSOLIDATED BALANCE SHEET December 31, December 31, 2010 2009 (In thousands, except par value amounts) ASSETS Current assets: Cash and cash equivalents ...Short-term investments ...Accounts receivable, net ...Loans and interest receivable, net ...Funds receivable and customer accounts ...

  • Page 92
    ...Inc. CONSOLIDATED STATEMENT OF INCOME Year Ended December 31, 2008 2009 2010 (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 transaction and...

  • Page 93
    eBay Inc. CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME Year Ended December 31, 2009 2010 (In thousands) 2008 Net income ...Other comprehensive income: Foreign currency translation ...Unrealized gains (losses) on investments ...Unrealized gains (losses) on cash flow hedges ...Estimated tax ...

  • Page 94
    ...year ...Additional paid-in-capital: Balance, beginning of year ...Common stock and stock-based awards issued and assumed ...Stock-based compensation ...Stock-based awards tax impact ...Structured stock repurchases ...Noncontrolling interests ...Balance, end of year ...Treasury stock at cost: Balance...

  • Page 95
    ...of restricted stock awards and units ...Proceeds from issuance of long-term debt, net ...Net borrowings (repayments) under commercial paper program ...Repayment of acquired line of credit ...Net borrowings (repayments) under credit agreement ...Funds receivable and customer accounts ...Funds payable...

  • Page 96
    ... the world, built on commerce, sustained by trust, and inspired by opportunity. eBay brings together millions of buyers and sellers every day on a local, national and international basis through an array of websites. eBay provides online marketplaces for the sale of goods and services as well as...

  • Page 97
    .... Revenues related to fees for listing items on our classified websites and are recognized over the estimated period of the classified listing. 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...

  • Page 98
    ...provide services to eBay and PayPal users, interest earned from banks on certain PayPal customer account balances and interest and fees earned on the Bill Me Later portfolio of receivables from loans. Revenues from contractual arrangements with third parties are recognized as the contracted services...

  • Page 99
    ... through our Bill Me Later merchant network. The terms of the consumer relationship require us to submit monthly bills to the consumer detailing loan repayment requirements. The terms also allow us to charge the consumer, in certain circumstances, interest and fees. Loans receivable are reported at...

  • Page 100
    ... Funds receivable and funds payable relate primarily to our Payments segment and arise due to the time 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 or through a debit card...

  • Page 101
    ...method of accounting are estimated by management based on the fair value of assets received. Identifiable intangible assets consist of purchased customer lists and user base, trademarks and trade names, developed technologies, and other intangible assets, including patents and contractual agreements...

  • Page 102
    ... institutions that management believes are of high credit quality. In addition, funds receivable are generated with financial institutions or credit card companies that management believes are of high credit quality. Our accounts receivable are derived from revenue earned from customers located in...

  • Page 103
    ...of net accounts receivable or net loans receivable. During the years ended December 31, 2008, 2009 and 2010, no customers accounted for more than 10% of net revenues. Impairment of long-lived assets We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes...

  • Page 104
    ... to our consolidated financial statements. During the fourth quarter of 2010, we adopted the new disclosure guidance related to the credit quality of financing receivables and the allowance for credit losses. This guidance requires companies to provide more information about the credit quality of...

  • Page 105
    ...Each of these three companies is included in our Marketplaces segment. Allocation of the purchase consideration resulted in net tangible assets of $0.3 million, purchased intangible assets of $18.0 million and goodwill of $77.6 million. The allocation of the purchase price for these acquisitions has...

  • Page 106
    ... U.S. merchants to offer, and U.S. consumers to obtain, credit at the point of sale for ecommerce transactions and is included in our Payments segment. Bill Me Later's purchase consideration included cash of $817.0 million, fair value of options assumed of $87.7 million and transaction costs of...

  • Page 107
    ...are reflected in other assets on our consolidated balance sheet. These securities mature in five years and offer a variable interest rate (approximately 7% as of December 31, 2010). Mr. Marc L. Andreessen, a member of the board of directors of eBay, is a general partner of Andreessen Horowitz, which...

  • Page 108
    ...Carrying Life Amount (Years) Amount Amortization Amount (Years) (In thousands, except years) Gross Carrying Amount Accumulated Amortization Customer lists and user base ...$ 819,653 $ (524,667) $294,986 Trademarks and trade names ...634,387 (300,046) 334,341 Developed technologies ...225,614 (152...

  • Page 109
    ... Year Ended December 31, 2010 Marketplaces Payments Consolidated (In thousands) 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
    ... costs include specific costs of net revenues, sales and marketing expenses, and general and administrative expenses, such as advertising and marketing programs, customer support expenses, bank charges, internal interest charges related to Bill Me Later, site operations expenses, product development...

  • Page 111
    ... as available for sale are as follows: Gross Amortized Cost December 31, 2009 Gross Gross Unrealized Unrealized Gains Losses (In thousands) Estimated Fair Value Short-term investments: Restricted cash ...Corporate debt securities ...Government and agency securities ...Time deposits and other...

  • Page 112
    ...four years ...Four years through five years ... $1,045,403 507,777 783,096 204,517 267,219 $2,808,012 Equity and cost method investments We have made multiple equity and cost method investments in privately held companies which are reported in long-term investments on our consolidated balance sheet...

  • Page 113
    ...31, 2009 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Description Assets: Cash and cash equivalents ...Short-term investments: Restricted cash ...Corporate debt securities ...Government and agency securities ...Time deposits ...Equity...

  • Page 114
    ... take into account the contract terms as well 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 fifteen months in duration. We maintain our customer...

  • Page 115
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) financial institution as a basis for calculating our net interest expense or income. As of December 31, 2010, we had a total of $3.3 billion in cash withdrawals offsetting our $3.3 billion in Aggregate Cash Deposits held within the ...

  • Page 116
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Effect 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 for the years ended ...

  • Page 117
    ...expenses and other current liabilities: Acquisition related accrued expenses ...Advertising ...Compensation and related benefits ...Contractors and consultants ...Liability for unrecognized tax benefits ...Professional fees ...Restructuring ...Transaction loss accrual ...VAT accrual ...Other current...

  • Page 118
    ... by approximately 800 employees worldwide to simplify and streamline our organization and strengthen the overall competitiveness of our existing businesses. During 2008 and 2009 we incurred $49.1 million and $12.2 million, respectively, in restructuring charges related to this plan. A summary of the...

  • Page 119
    ... customers in order to offer the Bill Me Later service. Currently, when a consumer makes a purchase using a Bill Me Later credit product issued by a chartered financial institution, the chartered financial institution extends credit to the consumer, funds the extension of credit at the point of sale...

  • Page 120
    ... 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 121
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In May 2009, the U.K. High Court of Justice ruled in the case filed by L'Oréal SA, Lancôme Parfums et Beauté & Cie, Laboratoire Garnier & Cie and L'Oréal (UK) Ltd against eBay International AG, other eBay companies, and several eBay sellers (No...

  • Page 122
    ... 2008 data breach involving 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 147,000 users have sued IAC over this breach in...

  • Page 123
    ... to various intellectual property rights. In our PayPal business, we have provided an indemnity 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...

  • Page 124
    ... including corporate and regulatory requirements, price, 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 125
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) All stock options granted under these plans generally vest 25% one year from the date of grant (or 12.5% six months from the date of grant for grants to existing employees) with the remainder vesting at a rate of 2.08% per month ...

  • Page 126
    ... at the time of grant. Stock-Based Compensation Expense The following table presents details of total stock-based compensation expense that is included in each line item on our consolidated statement of income (in thousands): Year Ended December 31, 2008 2009 2010 Cost of net revenues ...Sales and...

  • Page 127
    ... acquisitions. Stock Option Activity The following table summarizes stock option activity under our equity incentive plans as of and for the year ended December 31, 2010 (in thousands, except per share amounts): Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate...

  • Page 128
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Nonvested Shares Activity A summary of the status of and changes in nonvested shares granted under our equity incentive plans and assumed in acquisitions as of December 31, 2010 and changes during the year ended December 31, 2010 is ...

  • Page 129
    ... and credits ...Accruals and allowances ...Stock-based compensation ...Net unrealized losses ...Net deferred tax assets ...Valuation allowance ...Deferred tax liabilities: Unremitted foreign earnings ...Acquisition-related intangibles ...Depreciation and amortization ...Available-for-sale securities...

  • Page 130
    ...is recorded as deferred and other tax liabilities, net in our consolidated balance sheet. During all years presented, we recognized interest and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of income. In 2010, we recognized a net...

  • Page 131
    ... these examinations. Although the timing of the resolution and/or closure on audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to examination...

  • Page 132
    eBay Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) March 31 Quarter Ended June 30 September 30 December 31 2010 Net revenues ...Gross profit ...Net income ...Net income per share-basic ...Net income per share-diluted ...Weighted-average shares: Basic ...Diluted ... $2,196,057 $1,589,...

  • Page 133
    ... 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 Balance at End of Period Allowances for Doubtful Accounts and Authorized Credits Year ended...

  • Page 134
    ...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 28th day of January, 2011. eBay Inc...

  • Page 135
    ... M. Moffett Director By: /S/ DAWN G. LEPORE Dawn G. Lepore Director By: /S/ THOMAS J. TIERNEY Thomas J. Tierney Director By: /S/ RICHARD T. SCHLOSBERG, III Richard T. Schlosberg, III Director Date: January 28, 2011 130

  • Page 136
    ... with this 10-K Incorporated by Reference File No. Date Filed No. Exhibit Description Form 2.01 Share Allocation and Tender Offer Agreement, dated as of April 16, 2009, by and among Registrant, eBay KTA (UK). Ltd. and Gmarket Inc. Share Purchase Agreement, dated as of April 16, 2009, by and...

  • Page 137
    ...Reference File No. Date Filed 10.05+ 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...

  • Page 138
    ... and among Registrant, Bank of America, N.A., as Administrative Agent, and other lenders named from time to time therein. Separation Agreement dated October 20, 2010 between Lorrie Norrington and Registrant. Statement regarding computation of ratio of earnings to fixed charges. List of Subsidiaries...

  • Page 139
    ... a management contract or compensatory plan or arrangement ++ Portions of this exhibit are subject to a request for confidential treatment and have been redacted and filed separately with the Securities and Exchange Commission. * The annexes and schedules to the Share Purchase Agreement have...

  • Page 140
    eBay Inc., 2145 Hamilton Avenue San Jose, California 95125 http://investor.ebayinc.com This cover was printed on paper that is 100% post-consumer recycled, chlorine free and manufactured by wind power. It is printed using soy-based inks, which are easier to recycle and more environmentally friendly...