Expedia 2013 Annual Report Download - page 28

addition, we have experienced, and may experience in the future, declines in seasonal liquidity and capital
provided by our merchant hotel business, which has historically provided a meaningful portion of our operating
cash flow and is dependent on several factors, including the rate of growth of our merchant hotel business and the
relative growth of businesses which consume rather than generate working capital, such as our agency hotel,
advertising and managed corporate travel businesses and payment terms with suppliers. We also continued to see
positive momentum in our global roll out of the ETP program launched in 2012. As this program continues to
expand, and depending on relative traveler and supplier and traveler adoption rates and customer payment
preferences, among other things, the scaling of ETP has and will continue to negatively impact near term
working capital cash balances, cash flow over time and liquidity.
The availability of funds depends in significant measure on capital markets and liquidity factors over which
we exert no control. In light of periodic uncertainty in the capital and credit markets, we can provide no
assurance that sufficient financing will be available on desirable or even any terms to fund investments,
acquisitions, stock repurchases, dividends, debt refinancing or extraordinary actions or that our counterparties in
any such financings would honor their contractual commitments. In addition, any downgrade of our debt ratings
by Standard & Poor’s, Moody’s Investor Service or similar ratings agencies, increases in general interest rate
levels and credit spreads or overall weakening in the credit markets could increase our cost of capital.
System interruption and the lack of redundancy in our information systems may harm our businesses.
We rely on computer systems to facilitate and process transactions. We have experienced and may in the
future experience system interruptions that make some or all of these systems unavailable or prevent us from
efficiently fulfilling orders or providing services to third parties. Significant interruptions, outages or delays in
our internal systems, or systems of third parties that we rely upon — including multiple co-location providers for
data centers, cloud computing providers for application hosting, and network access providers — and network
access, or deterioration in the performance of such systems, would impair our ability to process transactions and
decrease our quality of service that we can offer to our travelers. These interruptions could include security
intrusions and attacks on our systems for fraud or service interruption (called “denial of service” or “bot”
attacks). If we were to experience frequent or persistent system failures, our reputation and brands could be
harmed.
In addition, we do not have backup systems or contingency plans for certain critical aspects of our
operations or business processes, many other systems are not fully redundant and our disaster recovery or
business continuity planning may not be sufficient. Fire, flood, power loss, telecommunications failure, break-
ins, earthquakes, acts of war or terrorism, acts of God, computer viruses, electronic intrusion attempts from both
external and internal sources and similar events or disruptions may damage or impact or interrupt computer or
communications systems or business processes at any time. Although we have put measures in place to protect
certain portions of our facilities and assets, 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.
We rely on the performance of highly skilled personnel and, if we are unable to retain or motivate key
personnel or hire, retain and motivate qualified personnel, our business would be harmed.
Our performance is largely dependent on the talents and efforts of highly skilled individuals. Our future
success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel
for all areas of our organization. In particular, the contributions of Barry Diller, our Chairman and Senior
Executive, and Dara Khosrowshahi, our Chief Executive Officer, are critical to the overall management of the
company. Our future success will depend on the performance of our senior management and key employees.
Expedia cannot ensure that it will be able to retain the services of Mr. Diller, Mr. Khosrowshahi or any other
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