Expedia 2006 Annual Report Download - page 19

loss, telecommunications failure, break-ins, earthquakes, acts of war or terrorism, acts of God, computer
viruses, physical or electronic break-ins and similar events or disruptions may damage or interrupt computer or
communications systems at any time. Any of these events could cause system interruption, delays and loss of
critical data, and could prevent us from providing services to our travelers and/or third parties for a significant
period of time. Remediation may be costly and we may not have adequate insurance to cover such costs.
Moreover, the costs of enhancing infrastructure to attain improved stability and redundancy may be time
consuming and expensive and may require resources and expertise that are difficult to obtain.
Our expansion places a significant strain on our management, technical, operational and financial
resources.
We have rapidly and significantly expanded our operations both domestically and internationally and
anticipate expanding further to pursue growth of our product and service offerings and customer base. Such
expansion increases the complexity of our business and places a significant strain on our management,
operations, technical performance, financial resources and internal financial control and reporting functions.
There can be no assurance that we will be able to manage our expansion effectively. Our current and
planned personnel, systems, procedures and controls may not be adequate to support and effectively manage
our future operations, especially as we employ personnel in multiple geographic locations. We may not be
able to hire, train, retain, motivate and manage required personnel, which may limit our growth. If any of this
were to occur, it could damage our reputation, limit our growth, negatively affect our financial performance,
and hurt our business.
Acquisitions could result in operating and financial difficulties.
Our future growth may depend, in part, on acquisitions. To the extent that we grow through acquisitions,
we will face the operational and financial risks that commonly accompany that strategy. We would also face
operational risks, such as failing to assimilate the operations and personnel of the acquired businesses,
disrupting their ongoing businesses, impairing management resources and their relationships with employees
and travelers as a result of changes in their ownership and management. Further, the evaluation and negotiation
of potential acquisitions, as well as the integration of an acquired business, may divert management time and
other resources. Some acquisitions may not be successful and their performances may result in the impairment
of their carrying value.
Certain financial and operational risks related to acquisitions that may have a material impact on our
business are:
• Use of cash resources and incurrence of debt and contingent liabilities in funding acquisitions;
• Amortization expenses related to acquired intangible assets and other adverse accounting consequences;
• Costs incurred in identifying and performing due diligence on potential acquisition targets that may or
may not be successful;
• Difficulties and expenses in assimilating the operations, products, technology, information systems or
personnel of the acquired company;
• Impairment of relationships with employees, suppliers and affiliates of our business and the acquired
business;
• The assumption of known and unknown debt and liabilities of the acquired company;
• Entrance into markets in which we have no direct prior experience; and
• Impairment of goodwill or other intangible assets arising from our acquisitions (for example, in the
quarter ended September 30, 2006, we recognized a $47.0 million impairment charge related to an
indefinite lived intangible asset of Hotwire).
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