eTrade 1999 Annual Report Download - page 21

Risks Associated with Dependence on Online Commerce and the Internet
The market for electronic brokerage services, particularly over the Internet, is rapidly evolving. Consequently, demand and market
acceptance for recently introduced services and products are subject to a high level of uncertainty. For us, this uncertainty is
compounded by the risks that consumers will not continue to adopt online commerce and that commerce on the Internet will not
adequately develop or flourish to permit us to continue to grow.
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Sales of many of our services and products will depend on consumers adopting the Internet as a method of doing business. This may
not occur because of inadequate development of the necessary infrastructure, such as a reliable network infrastructure, or
complementary services and products, such as high speed modems and communication lines. The Internet has grown and is expected
to grow both in number of users and amount of traffic. There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by this continued growth. In addition, the Internet could lose its viability due to slow
development or adoption of standards and protocols to handle increased Internet activity, or due to increased governmental regulation.
Moreover, critical issues including security, reliability, cost, ease of use, accessibility and quality of service remain unresolved and
may negatively affect the growth of Internet use or commerce on the Internet. Because use of the Internet for commerce is new and
evolving, there can be no assurance that the Internet will prove to be a viable commercial marketplace. If these critical issues are not
addressed, if the necessary infrastructure is not developed, or if the Internet does not become a viable commercial marketplace, our
business, financial condition and operating results could be materially adversely affected.
Adoption of online commerce by individuals who have relied upon traditional means of commerce in the past will require such
individuals to accept new and very different methods of conducting business. Moreover, our brokerage services over the Internet
involve a new approach to securities trading which requires extensive marketing and sales efforts to educate prospective customers
regarding its uses and benefits. For example, consumers who trade with traditional brokerage firms, or even discount brokers, may be
reluctant or slow to change to obtaining brokerage services over the Internet. Also, concerns about security and privacy on the Internet
may hinder the growth of online brokerage trading, which could have a material adverse effect on our business, financial condition and
operating results.
Volatility of Stock Price
The market price of our Common Stock has been, and is likely to continue to be, highly volatile and subject to wide fluctuations due to
various factors, many of which may be beyond our control, including:
.quarterly variations in operating results;
.volatility in the stock market;
.volatility in the general economy;
. announcements of technological innovations or new software, services or products by us or our competitors; and
.changes in financial estimates and recommendations by securities analysts.
In addition, there have been large price and volume fluctuations in the stock market which have affected the market prices of securities
of many technology, Internet and financial services companies, often unrelated to the operating performance of such companies. These
broad market fluctuations may adversely affect the market price of our Common Stock. In the past, volatility in the market price of a
company's securities has often led to securities class action litigation. Such litigation could result in substantial costs and a diversion of
our attention and resources, which could have a material adverse effect on our business, financial condition and operating results.
Risks Associated with Dependence on Intellectual Property Rights
Our success and ability to compete are dependent to a significant degree on our proprietary technology. We rely primarily on
copyright, trade secret and trademark law to protect our technology. Effective trademark protection may not be available for our
trademarks. Although we have registered the trademark "E*TRADE" in the United States and certain other countries, and have certain
other registered trademarks, there can be no assurance that we will be able to secure significant protection for these trademarks. Our
competitors or others may adopt product or service names similar to "E*TRADE", thereby impeding our ability to build brand identity
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and possibly leading to customer confusion. Our inability to adequately protect the name "E*TRADE" could have a material adverse
2002. EDGAR Online, Inc.