eTrade 2005 Annual Report Download - page 16

Table of Contents
ITEM1A.RISK FACTORS
Risks Relating to the Nature and Operation of Our Business
Many of our competitors have greater financial, technical, marketing and other resources
The financial services industry is highly competitive, with multiple industry participants competing for the same customers. Many of
our competitors have longer operating histories and greater resources than we do and offer a wider range of financial products and
services. The impact of competitors with greater name recognition, market acceptance and larger customer bases could adversely affect
our revenue growth and customer retention. Our competitors may also be able to respond more quickly to new or changing
opportunities and demands and withstand changing market conditions better than we can. Competitors may conduct extensive
promotional activities, offering better terms, lower prices and/or different products and services that could attract current E*TRADE
customers and potentially result in price wars within the industry. Some of our competitors may also benefit from established
relationships among themselves or with third parties enhancing their products and services.
If we do not successfully manage consolidation opportunities, we could be at a competitive disadvantage
There has recently been significant consolidation in the financial services industry and this consolidation is likely to continue in the
future. Should we be excluded from or fail to take advantage of viable consolidation opportunities, our competitors may be able to
capitalize on those opportunities and create greater scale and cost efficiencies to our detriment.
We have recently acquired a number of businesses, including Harris
direct
and BrownCo. The primary assets of these businesses are
their customer accounts. Our retention of these assets and the customers of businesses we acquire may be impacted by our ability to
successfully integrate the acquired operations, products (including pricing) and personnel. Diversion of management attention from
other business concerns could have a negative impact. In the event that we are not successful in our integration efforts, we may
experience significant attrition in the acquired accounts or experience other issues that would prevent us from achieving the level of
revenue enhancements and cost savings that we expect with respect to an acquisition.
We expect to pursue additional acquisitions of companies in our industry, which may require us to obtain additional financing and
subject us to integration risks. There can be no assurance that we will realize a positive return on any acquisition or that future
acquisitions will not be dilutive to earnings.
Downturns or disruptions in the securities markets could reduce trade volumes and margin borrowing and increase our
dependence on our more active customers who receive lower pricing
Online investing services to the retail customer, including trading and margin lending, account for a significant portion of our
revenues. Although we continue to diversify our revenue sources, we expect online investing services to continue to account for a
significant portion of our revenues in the foreseeable future. A downturn in or disruption to the securities markets may lead to changes
in volume and price levels of securities and futures transactions which may, in turn, result in lower trading volumes and margin
lending. In particular, a decrease in trading activity within our lower activity accounts would significantly impact revenues and
increase dependence on more active trading customers who receive more favorable pricing based on their trade volume. A decrease in
trading activity or securities prices would also typically be expected to result in a decrease in margin borrowing, which would reduce
the revenue that we generate from interest charged on margin borrowing. More broadly, any reduction in overall transaction volumes
would likely result in lower revenues and may harm our operating results because many of our overhead costs are fixed.
We depend on payments from our subsidiaries
We depend on dividends, distributions and other payments from our subsidiaries to fund payments on our obligations, including our
debt obligations. Regulatory and other legal restrictions may limit our ability to
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2006. EDGAR Online, Inc.