eTrade 2005 Annual Report Download - page 14

Table of Contents
Management monitors actions by competitors by reviewing new product and service offerings. We review competitive pricing of both
brokerage and bank products. To understand our position among our peers, we review comparative analytical data including Daily
Average Revenue Trades (“DARTs”) of major online brokers. Based on this analysis, we ranked third in the number of DARTs
reported for the years ended December31, 2005 and 2004.
Overall, we believe our combination of operational efficiency and customer focus creates an entity with a value proposition unique to
the financial services industry. Our operating efficiency is achieved through the use of the Internet as a low cost distribution medium
and continued technology developments.
ACQUISITIONS AND DISPOSITIONS
Acquisitions
Consistent with our strategy to grow through both strategic acquisitions and organic growth, we completed four acquisitions in 2005.
These acquisitions included Harris
direct,
LLC
(“
Harris
direct”)
, J.P. Morgan Invest, LLC (known as “BrownCo”), Kobren Insight
Management (“Kobren”) and Howard Capital Management (“Howard Capital”.) Harris
direct
, a U.S.-based online discount brokerage
company with approximately 425,000 customer accounts and $0.9 billion in brokerage receivables, was acquired in October 2005.
BrownCo, acquired from J.P. Morgan Chase& Co. in November 2005, is also an online brokerage company with approximately 186,000
customers and $3.1 billion in brokerage receivables. Our 2005 strategic acquisitions also included two wealth management companies,
Kobren and Howard Capital. These investment advisory businesses managed a combined total of $1.5 billion in customer assets on the
dates of purchase. Additional information about these acquisitions can be found in MD&A and Note 2 to the Consolidated Financial
Statements.
Dispositions
Consistent with our strategy to continually evaluate our businesses and maintain a focus on providing services consistent with our
strategy, we decided to sell or exit several product lines. In 2005, we sold our Consumer Finance business, exited our institutional
proprietary trading business and made the decision to sell our professional agency business, ultimately executing a sale agreement in
February 2006. The Consumer Finance business originated and serviced recreational vehicles (“RVs”) and marine loans. We retained
the loan portfolio; however, we will no longer originate or service RV or marine loans. We also made the decision to surrender our
rights to trade OTC stocks on the floor of the CHX in January 2006. Additional information about these dispositions and closures can
be found in MD&A and Note 3 to the Consolidated Financial Statements.
INTERNATIONAL OPERATIONS
We offer services in international markets directly through its website at http://www.etrade.com as well as through additional branded
retail brokerage websites in Canada, Denmark, France, Germany, Hong Kong, Iceland, Sweden and the United Kingdom. We also have
minority equity investments in companies that license the E*TRADE brand and operate websites in Australia, Japan and Korea. Our
reported performance metrics, including DARTs, do not include operating information from these licensees. Our total net U.S.
revenues, which we determine based on the geographic location of the legal entity in which the revenue was earned, were $1.50 billion
in 2005, $1.31 billion in 2004 and $1.22 billion in 2003. Our total net non-U.S. revenues were $0.20 billion in 2005, $0.17 billion in 2004 and
$0.12 billion in 2003. No individual foreign country accounted for more than 10% of revenues in any of these years.
REGULATION
Our business is subject to regulation by U.S. Federal and state regulatory agencies and securities exchanges and by various non-U.S.
governmental agencies or regulatory bodies, securities exchanges and central banks, each of which has been charged with the
protection of the financial markets and the protection of the interests of those participating in those markets. These regulatory
agencies in the United States include, among others, the
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2006. EDGAR Online, Inc.