eTrade 1999 Annual Report Download - page 7

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and redundant, providing rapid, reliable, safe information access and retrieval.
. The Trade Processor. The core of the E*TRADE trading engine is the automated processor, designed to provide the highest degree of
automation for all E*TRADE transactions. The automated processor is designed to rapidly read data, process transactions and transmit
information to multiple locations. Because of this, the Company processes over 95% of its transactions without any manual
intervention. Dual facilities that run independently share load balancing and provide redundancy and backup, as well as, scalability.
The proprietary nature of the system, along with user ID and password protection at the application level, provide security for the
automated processor. Internet access to the processor is through the Company's Web site, which restricts access through the use of
secured network servers and routers.
The Company maintains a technical development staff to continually enhance its software and develop new products and services. The
Company's software is designed using Java code objects so it is versatile and reusable, allowing E*TRADE products to be configured
to meet the differing demands of strategic relationships or customer requests.
7
The Company is making significant investments in systems technology and has established technology centers in both Rancho
Cordova, California and Alpharetta, Georgia. These facilities support systems, network services, trading, customer service, transaction
redundancy and backup between the two locations, thereby providing an operational system in the event of a service interruption at
either facility. To provide for system continuity during potential outages, the Company also has equipped its computer facilities with
uninterruptible power supply units, as well as back-up generators.
The information and financial services and communications industries are characterized by rapid technological change, changes in
customer requirements, frequent new service and product introductions and enhancements, and emerging industry standards. See "Risk
Factors--Risks Associated with Delays in Introduction of New Services and Products."
A significant risk to online commerce and communication is the insecure transmission of confidential information over public
networks. The Company relies on encryption and authentication technology, including public key cryptography technology licensed
from RSA, to provide the security and authentication necessary to effect secure transmission of confidential information. See "Risk
Factors--Risks Associated with Encryption Technology."
Strategic Relationships
The Company pursues strategic relationships to increase its access to online consumers, to build brand name recognition and to expand
the products and services the Company can provide to its online customers.
Core Business Expansion
E*TRADE has secured or is actively pursuing alliances with (i) Internet access and service providers, (ii) Internet content providers,
(iii) providers of home and online banking services, and (iv) electronic commerce companies. These alliances are intended to increase
the Company's core customer base, transaction volume and operational efficiency and to further enhance its brand name recognition.
The Company has concentrated principally on securing alliances with Internet access, online service and content providers. While a
majority of the Company's customers access its services directly through the Internet, direct modem access or touch-tone telephone,
many use online service providers (America Online, CompuServe, and Microsoft Network). Strategic relationships with such service
providers allow the Company to access a greater number of potential customers and allow the online service providers to offer their
subscribers a broader range of service options. The Company's partnerships with leading content providers fulfill customers'
information needs and help drive transaction volume. See "Risk Factors--Risks Associated with Acquisitions, Strategic Relationships."
New Account Development and Distribution
The Company has developed alliances with key channels in the online medium to increase account development and expand
distribution. These channels include proprietary online services, Internet service providers and popular destination Web sites such as
search engines or financial content providers. These channels attract significant numbers of users, and the Company's relationships
provide access to expanded market opportunities. Set forth below are descriptions of certain of the Company's key alliances:
. America Online ("AOL"). In July 1998, the Company entered into a two year agreement with AOL, the nation's largest provider of
internet service and content. E*TRADE is one of four brokers represented in AOL Personal Finance. The agreement was expanded in
fiscal 1999 to include the very successful "Get 6 Free Months of AOL" offer and an even broader presence on AOL.
2002. EDGAR Online, Inc.