eTrade 1999 Annual Report Download - page 36

believed to be adequate, and develops contingency plans believed to be adequate, some issues may not be identified or corrected in
time to prevent material adverse consequences to the Company.
The Company's plan may also be affected by regulatory changes, changes in industry customs and practices, and significant systems
modifications unrelated to the year 2000 project, including upgrades and additions to capacity, and the cost and continued availability
of qualified personnel and other resources.
On June 1, 1999, the Company entered into a definitive agreement to merge with Telebanc Financial Corporation ("Telebanc"), a
holding company for Telebank, the nation's largest branchless bank, providing banking products and services over the Internet. On
July 13, 1999, the Company entered into a definitive agreement to acquire TIR (Holdings) Limited ("TIR"), an international financial
services company offering global multi-currency securities execution and settlement services, and a leader in providing independent
research to institutional investors. We have been advised by both Telebanc and TIR that they have ongoing programs to identify and
remediate any year 2000 issues. The Company does not currently have any direct control over the year 2000 activities of Telebanc.
With respect to TIR, we have relied upon the representations of management or former management with respect to TIR's year 2000
readiness, including representations and warranties that TIR's products and services and its internal computer systems are year 2000
ready, that TIR has made appropriate inquires of its key suppliers of services and products, and that TIR reasonably expects that it will
not incur any material expenses associated with securing year 2000 readiness of its products or services,
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internal computer systems or the computer systems of TIR's key suppliers or customers. The TIR acquisition closed on August 31,
1999 and the Telebanc acquisition is expected to close during 1999; therefore, the Company's operating results will be impacted by the
additional assessment, remediation, validation, implementation and testing costs which these entities may incur. While the
managements of Telebanc and TIR have made certain representations with respect to their year 2000 readiness, we can give no
assurances as to the adequacy of the year 2000 efforts of Telebanc or TIR or their impact to the Company.
The Company spent approximately $5.5 million on year 2000 readiness efforts through September 30, 1999, and currently estimates
that it will spend approximately an additional $1 million. These expenditures will consist primarily of compensation for employees and
contractors dedicated to this project. This estimate excludes the time that may be spent by management and administrative staff in
guiding and assisting the effort described above or for making systems other than core brokerage computer systems year 2000 capable.
The Company expects to fund all year 2000 related costs through operating cash flows. These costs are not expected to result in
increased information technology expenditures because they will be funded through a reallocation of the Company's overall
development spending. In accordance with generally accepted accounting principles, such expenditures will be expensed as incurred.
At this time, it does not appear that the costs of addressing year 2000 issues will have a material adverse impact on the Company's
financial position. However, there can be no assurance that these costs will not be greater than anticipated. In the event that the
Company, and third parties upon which it relies, have not adequately addressed year 2000 issues, it could result in a material financial
risk to the Company.
The foregoing year 2000 discussion and the information contained herein is provided as a Year 2000 Readiness Disclosure and
contains forward-looking statements. Such statements, including without limitation, anticipated costs and the dates by which the
Company expects to complete certain actions, are based on management's best current estimates, which were derived utilizing
numerous assumptions about future events, including the continued availability of certain resources, representations received from
third parties and other factors. However, there can be no guarantee that these estimates will be achieved, and actual results could differ
materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the ability
to identify and remediate all relevant systems, results of year 2000 testing, adequate resolution of year 2000 issues by governmental
agencies, businesses and other third parties who are service providers, suppliers, licensors and vendors of the Company, unanticipated
system costs, the adequacy of and ability to implement contingency plans and similar uncertainties. The forward-looking statements
made in the foregoing year 2000 discussion speak only as of the date on which such statements are made, and the Company undertakes
no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is
made or to reflect the occurrence of unanticipated events.
Variability of Results
The Company expects to experience significant fluctuations in future quarterly operating results that may be caused by many factors,
including the following: the timing of introductions or enhancements to online investing services and products by the Company or its
competitors; market acceptance of online investing services and products; the pace of development of the market for online commerce;
changes in trading volume in securities markets; trends in securities markets; domestic and international regulation of the brokerage
industry; changes in pricing policies by the Company or its competitors; changes in strategy; the success of or costs associated with
acquisitions, joint ventures or other strategic relationships; changes in key personnel; seasonal trends; the extent of international
expansion; the mix of international and domestic revenues; changes in the level of operating expenses to support projected growth; and
2002. EDGAR Online, Inc.