eBay 1999 Annual Report Download - page 38

items listed by users, the volume of user transactions that are successfully completed and the final prices paid for
the items listed. If the volume of traffic on our website or the number of items being listed for sale continues to
increase, we will need to expand and upgrade our technology, transaction processing systems and network
infrastructure. We may be unable to accurately project the rate or timing of increases, if any, in the use of our
service or to timely expand and upgrade our systems and infrastructure to accommodate any increases.
We use internally developed systems to operate our service and for transaction processing, including billing
and collections processing. We must continually improve these systems in order to accommodate the level of use
of our website. In addition, we may add new features and functionality to our services that would result in the
need to develop or license additional technologies. We capitalize hardware and software costs associated with
this development in accordance with company policy and include such amounts in computer equipment and
software. Internal expenses are often judged to have useful lives of less than one year, or have been more
appropriately classified as maintenance related costs. As such, these costs are expensed as incurred. Our inability
to add additional software and hardware or to upgrade our technology, transaction processing systems or network
infrastructure to accommodate increased traffic or transaction volume could have adverse consequences. These
consequences include unanticipated system disruptions, slower response times, degradation in levels of customer
support, impaired quality of the users’ experience on our service and delays in reporting accurate financial
information. Our failure to provide new features or functionality also could result in these consequences. We
may be unable to effectively upgrade and expand our systems in a timely manner or to integrate smoothly any
newly developed or purchased technologies with our existing systems. These difficulties could harm or limit our
ability to expand our business.
System failures could harm our business
We have experienced system failures from time to time. Our website has been interrupted for periods of up
to 22 hours. In addition to placing increased burdens on our engineering staff, these outages create a flood of
user questions and complaints that must be responded to by our customer support personnel. Any unscheduled
interruption in our service results in an immediate loss of revenues that can be substantial and may cause some
users to switch to our competitors. If we experience frequent or persistent system failures, our reputation and
brand could be permanently harmed. We are currently taking steps to increase the reliability and redundancy of
our system. These steps are expensive, reduce our margins and may not be successful in reducing the frequency
or duration of unscheduled downtime. Our eBay Germany website is maintained by a third party. Any failure by
this party to successfully operate this site could damage our business.
Substantially all of our computer hardware for operating our service currently is located at the facilities of
Exodus Communications, Inc. in Santa Clara, California and AboveNet in San Jose, California. These systems
and operations are vulnerable to damage or interruption from earthquakes, floods, fires, power loss,
telecommunication failures and similar events. They are also subject to break-ins, sabotage, intentional acts of
vandalism and similar misconduct. We do not maintain fully redundant systems or alternative providers of
hosting services, and we do not carry business interruption insurance sufficient to compensate us for losses that
may occur. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated
problems at either the Exodus or AboveNet facility could result in interruptions in our services. In addition, the
failure by Exodus or AboveNet to provide our required data communications capacity could result in
interruptions in our service. Any damage to or failure of our systems could result in interruptions in our service.
Interruptions in our service will reduce our revenues and profits, and our future revenues and profits will be
harmed if our users believe that our system is unreliable.
Our stock price has been and may continue to be extremely volatile
The trading price of our common stock has been and is likely to be extremely volatile. Our stock price
could be subject to wide fluctuations in response to a variety of factors, including the following:
●actual or anticipated variations in our quarterly operating results;
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