eTrade 1999 Annual Report Download - page 17

.Discover Brokerage Direct, Inc. (a subsidiary of Morgan Stanley Dean Witter Discover & Company);
.Ameritrade, Inc. (a subsidiary of Ameritrade Holding Corporation);
.DLJdirect (a subsidiary of Donaldson, Lufkin & Jenrette Securities Corporation);
.Datek Online Holdings Corporation (Datek Online); and
.SURETRADE, Inc. (a subsidiary of Fleet Financial Group, Inc.)
We also encounter competition from established full commission brokerage firms such as PaineWebber Incorporated, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Salomon Smith Barney, Inc., among others. In addition, we compete with financial
institutions, mutual fund companies and other organizations, some of which provide electronic brokerage services.
Many of our competitors have longer operating histories and significantly greater financial, technical, marketing and other resources
than we do. In addition, many of our competitors offer a wider range of services and financial products than we do, and thus may be
able to respond more quickly to new or changing opportunities, technologies and customer requirements. Many of our competitors also
have greater name recognition and larger customer bases that could be leveraged, thereby gaining market share from us. Such
competitors may conduct more extensive promotional activities and offer better terms and lower prices to customers than we do,
possibly even sparking a price war in the electronic brokerage business. Moreover, certain
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competitors have established cooperative relationships among themselves or with third parties to enhance their services and products.
For example, Charles Schwab's One-Source mutual fund service and similar services may discourage potential customers from using
our brokerage services. Accordingly, it is possible that new competitors or alliances among existing competitors may significantly
reduce our market share.
General financial success within the securities industry over the past several years has strengthened existing competitors. We believe
that such success will continue to attract new competitors to the industry, such as banks, software development companies, insurance
companies, providers of online financial and information services and others, as such companies expand their product lines.
Commercial banks and other financial institutions have become more competitive with us by offering their customers certain corporate
and individual financial services traditionally provided by securities firms. The current trend toward consolidation in the commercial
banking industry could further increase competition in all aspects of our business. Commercial banks generally are expanding their
securities and financial services activities. While we cannot predict the type and extent of competitive services that commercial banks
and other financial institutions ultimately may offer, or whether legislative barriers will be modified, we may be adversely affected by
such competition or legislation. To the extent our competitors are able to attract and retain customers, our business or ability to grow
could be adversely affected. In many instances, we are competing with such organizations for the same customers. In addition,
competition among financial services firms exists for experienced technical and other personnel.
There can be no assurance that we will be able to compete effectively with current or future competitors or that such competition will
not have a material adverse effect on our business, financial condition and operating results.
Risks Associated with Management of a Changing Business
We have grown rapidly and our business and operations have changed substantially since we began offering electronic investing
services in 1992, and Internet investing services in February 1996, and we expect this trend to continue. Such rapid change and
expansion places significant demands on our administrative, operational, financial, and technical management and other resources.
We expect operating expenses and staffing levels to increase substantially in the future. In particular, we have hired and intend to hire
a significant number of additional skilled personnel, including persons with experience in both the computer and brokerage industries,
and, specifically, persons with Series 7 or other broker-dealer licenses. Competition for such personnel is intense, and there can be no
assurance that we will be able to find or keep additional suitable senior managers or technical persons in the future. We also expect to
expend resources for future expansion of our accounting and internal information management systems and for a number of other new
systems and procedures. In addition, we expect that future expansion will continue to challenge our ability to successfully hire and
retain associates. If our revenues do not keep up with operating expenses, our information management systems do not expand to meet
increasing demands, we fail to attract, assimilate and retain qualified personnel, or we fail to manage our expansion effectively, there
could be a material adverse effect on our business, financial condition and operating results.
The rapid growth in the use of our services has strained our ability to adequately expand technologically. As we acquire new
2002. EDGAR Online, Inc.