Amazon.com 2006 Annual Report Download - page 21

equivalents, and marketable securities balances typically reach their highest level (other than as a result of cash
flows provided by or used in investing and financing activities). This operating cycle results in a corresponding
increase in accounts payable at December 31. Our accounts payable balance generally declines during the first
three months of the year, resulting in a corresponding decline in our cash, cash equivalents, and marketable
securities balances.
Our Business Could Suffer if We Are Unsuccessful in Making, Integrating, and Maintaining Commercial
Agreements, Strategic Alliances, and Other Business Relationships
We provide e-commerce services to other businesses, such as through our Merchants@, Amazon Enterprise
Solutions, Website by Amazon and Fulfillment by Amazon program initiatives, as well as other commercial
agreements, strategic alliances and business relationships. Under these agreements, we provide technology,
fulfillment and other services, enable third parties to offer products or services through our websites, and power
third-party websites. These arrangements are complex and require substantial personnel and resource
commitments by us, which may limit the agreements we are able to enter into and our ability to integrate and
deliver services under them. If we fail to implement, maintain, and develop the components of these commercial
relationships, which may include fulfillment, customer service, inventory management, tax collection, payment
processing, licensing of third-party software, hardware, and content, and engaging third parties to perform
hosting and other services, these initiatives may not be viable. The amount of compensation we receive under
certain of these agreements is partially dependent on the volume of the other company’s sales. Therefore, if the
other company’s offering is not successful, the compensation we receive may be lower than expected or the
agreement may be terminated. Moreover, we may not be able to enter into additional commercial relationships
and strategic alliances on favorable terms. We also may be subject to claims from businesses to which we
provide these services if we are unsuccessful in implementing, maintaining or developing these services.
As our commercial agreements terminate, we may be unable to renew or replace these agreements on
comparable terms, or at all. Some of our agreements involve high margin services, such as marketing and
promotional agreements, and as they expire they may be replaced, if at all, by agreements involving lower
margin services. We may in the future enter into amendments on less favorable terms or encounter parties that
have difficulty meeting their contractual obligations to us, which could adversely affect our operating results.
Our present and future third-party services agreements, other commercial agreements, and strategic alliances
create additional risks such as:
• disruption of our ongoing business, including loss of management focus on existing businesses;
• impairment of other relationships;
• variability in revenue and income from entering into, amending, or terminating such agreements or
relationships; and
• difficulty integrating under the commercial agreements.
Our Business Could Suffer if We Are Unsuccessful in Making, Integrating, and Maintaining Acquisitions
and Investments
We have acquired and invested in a number of companies, and we may acquire or invest in or enter into
joint ventures with additional companies. These transactions create risks such as:
• disruption of our ongoing business, including loss of management focus on existing businesses;
• problems retaining key personnel;
• additional operating losses and expenses of the businesses we acquired or in which we invested;
• the potential impairment of amounts capitalized as intangible assets as part of the acquisition;
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