Amazon.com 2006 Annual Report Download - page 22

• the potential impairment of customer and other relationships of the company we acquired or in which
we invested or our own customers as a result of any integration of operations;
• the difficulty of incorporating acquired technology and rights into our offerings and unanticipated
expenses related to such integration;
• the difficulty of integrating a new company’s accounting, financial reporting, management, information,
human resource and other administrative systems to permit effective management, and the lack of
control if such integration is delayed or not implemented;
• the difficulty of implementing at companies we acquire the controls, procedures and policies appropriate
for a larger public company;
• potential unknown liabilities associated with a company we acquire or in which we invest; and
• for foreign transactions, additional risks related to the integration of operations across different cultures
and languages, and the economic, political, and regulatory risks associated with specific countries.
Finally, as a result of future acquisitions or mergers, we might need to issue additional equity securities,
spend our cash, or incur debt, contingent liabilities, or amortization expenses related to intangible assets, any of
which could reduce our profitability and harm our business.
We Have Foreign Exchange Risk
The results of operations of, and certain of our intercompany balances associated with, our international
websites are exposed to foreign exchange rate fluctuations. Upon translation, operating results may differ
materially from expectations, and we may record significant gains or losses on the remeasurement of
intercompany balances. As we have expanded our international operations, our exposure to exchange rate
fluctuations has increased.
In addition, our 6.875% PEACS are denominated in Euros and increases in the Euro relative to the
U.S. Dollar increase the U.S. dollar amount we owe as interest and principal on the 6.875% PEACS. We also
hold cash equivalents and/or marketable securities primarily in Euros, British Pounds, and Japanese Yen. If the
U.S. Dollar strengthens compared to these currencies, cash equivalents and marketable securities balances, when
translated, may be materially less than expected and vice versa.
Our Investments and the Consideration We Receive under Certain Commercial Agreements May Subject Us
to a Number of Risks
We have entered into, and may in the future enter into, commercial agreements whereby we perform certain
services in exchange for cash, equity securities of these companies, and/or additional benefits, such as website
traffic. Our compensation may be dependent on the volume of the other company’s sales. In some cases, we have
also made separate cash investments in the other company. To the extent we have received equity securities as
compensation, fluctuations in the value of such securities will affect our realization of amounts we have received
as compensation for services.
In the past, we amended several of our commercial agreements to reduce our cash proceeds, shorten the
term of the agreements, or both. We may in the future enter into further amendments of our commercial
agreements. Although these amendments did not affect the amount of unearned revenue previously recorded by
us (if any), the timing of revenue recognition of these recorded unearned amounts was changed to correspond
with the terms of the amended agreements. To the extent we believe any such amendments cause or may cause
the compensation to be received under an agreement to no longer be fixed or determinable, we limit our revenue
recognition to amounts received, excluding any future amounts not deemed fixed or determinable. As amounts
are subsequently received, such amounts are incorporated into our revenue recognition over the remaining term
of the agreement.
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