eBay 1999 Annual Report Download - page 26

incorporated in the state of Indiana in August 1986. The Kruse Companies conduct auctions, perform appraisal
services and auctioneering training for classic car auctions in various locations in the United States and
internationally. The aggregate consideration exchanged for the merger was 787,312 shares of eBay common
stock for all shares of capital stock of the Kruse Companies. The merger has been accounted for as a pooling of
interests.
Billpoint
On May 25, 1999, eBay acquired Billpoint, Inc. (‘‘Billpoint’’). Billpoint has developed a centralized,
turnkey authorization, billing and payment fulfillment solution that permits individuals and small merchants to
accept credit cards as payment for Internet-based sales transactions. Billpoint’s service is now being made
available to the Company’s users, providing the ability to accept credit cards for payment. In connection with
the merger, eBay issued a total of 524,132 shares of eBay common stock to the existing shareholders of Billpoint
as consideration for all shares of capital stock of Billpoint, all options, and warrants to purchase shares of
common stock of Billpoint outstanding immediately prior to the consummation of the merger were converted
into options and warrants to purchase shares of eBay common stock. The merger has been accounted for as a
pooling of interests.
alando
On June 15, 1999, eBay acquired alando.de.ag. (‘‘alando’’). alando was Germany’s leading online personal
trading platform. The aggregate consideration exchanged for the merger was 316,000 shares of eBay common
stock. The merger has been accounted for as a pooling of interests.
The following table sets forth, for the periods presented, certain data from eBay’s consolidated statement of
income as a percentage of net revenues. This information should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this report.
Year Ended December 31,
1997 1998 1999
Net revenues ................................... 100.0 % 100.0 % 100.0 %
Cost of net revenues .............................. 20.3 18.7 25.6
Gross profit ............................. 79.7 81.3 74.4
Operating expenses:
Sales and marketing .......................... 37.8 41.8 42.7
Product development .......................... 2.0 5.4 10.6
General and administrative...................... 15.8 18.4 19.2
Amortization of acquired intangibles .............. — 0.9 0.5
Merger related costs .......................... — — 1.9
Total operating expenses .................... 55.6 66.5 74.9
Income/(loss) from operations ....................... 24.1 14.8 (0.5)
Interest and other income/(expense), net ............... (4.8) (0.8) 9.5
Income before income taxes ........................ 19.3 14.0 9.0
Provision for income taxes ......................... (2.2) (5.6) (4.2)
Net income..................................... 17.1 % 8.4 % 4.8 %
It is difficult for the Company to forecast its revenues or earnings accurately and the operating results in
one or more future quarters may fall below the expectations of securities analysts or investors. Although accurate
revenue forecasts are difficult, the Company has begun to recognize the seasonal nature of its business. In
particular, the Company has noted stronger sequential quarterly online revenue growth between the fourth quarter
and the first quarter, and a lower, relatively level growth rate throughout the remainder of the year. Within offline
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