eBay 2001 Annual Report Download - page 37

In March 2000, we entered into a marketing and services agreement (as amended) with and
purchased a less than 5% equity interest in Autotrader.com LLC, or Autotrader. Under the terms of the
marketing and services agreement, we developed the co-branded eBay Motors site and Autotrader refers
customers desiring an auction pricing format to the co-branded site in exchange for a referral fee. Through
December 31, 2001, we have paid Autotrader $7.4 million in referral fees that are included in sales and
marketing expense. We also committed to incur $32.0 million in marketing and promotion of our service
and additional related services oÅered by Autotrader over the 3.5 year term of the agreement. Through
December 31, 2001, we have incurred $15.4 million of this marketing expenditure commitment.
During 2001, we entered into a series of marketing and services agreements with Microsoft that
obligate us to purchase online advertising promotions, software and related services through September
2003, totaling $8 million. In addition, Microsoft has agreed to purchase online advertising and other
services from eBay totaling $7 million over a three-year period ending June 2004. Through December 31,
2001, we have recognized $2.1 million in sales and marketing expenses for advertising services received,
incurred $1.4 million for Microsoft software products used to support our operations and recognized
$4.1 million in revenues for advertising services delivered to Microsoft.
Subsequent Events
In January 2002, we purchased the outstanding 35% interest in Billpoint held by Wells Fargo Bank
for approximately $43.5 million in cash, subject to an upward adjustment upon the occurrence, if any, of
certain events. This acquisition increased our ownership of Billpoint to a 100% interest and will be
accounted for using the purchase method.
In February 2002, we signed a deÑnitive agreement to purchase 100% of NeoCom Technology Co.,
Ltd., or NeoCom, for cash totaling $9.5 million, subject to certain working capital adjustments. NeoCom
provides an online Chinese language marketplace for the trading of goods and services for both individual
and business customers in Taiwan. NeoCom's corporate oÇce is located in Taipei, Taiwan and the
acquisition is expected to close in April 2002.
In March 2002, we signed a share purchase agreement to purchase a 38% interest in the outstanding
common stock of EachNet, Inc., which is a 33% interest on a fully diluted basis, in exchange for
$30.0 million in cash. EachNet provides an online marketplace for trading of goods and services for both
individual and business customers in the People's Republic of China. We will account for the investment
using the equity method of accounting.
General
We believe that existing cash, cash equivalents and investments, and any cash generated from
operations will be suÇcient to fund our operating activities, capital expenditures and other obligations for
the foreseeable future. However, if during that period or thereafter we are not successful in generating
suÇcient cash Öows from operations or in raising additional capital when required in suÇcient amounts
and on terms acceptable to us, our business could suÅer.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (""FASB'') issued SFAS No. 141, ""Business
Combinations,'' which requires business combinations initiated after June 30, 2001, to be accounted for
using the purchase method of accounting and broadens the criteria for recording intangible assets separate
from goodwill. Recorded goodwill and intangible assets will be evaluated against these new criteria and
may result in intangible assets with indeÑnite lives being subsumed into goodwill, or alternatively, amounts
initially recorded as goodwill may be separately identiÑed and recognized apart from goodwill. EÅective
July 1, 2001, we adopted the provisions of SFAS No. 141 that apply to business combinations initiated
after June 30, 2001. We adopted all remaining provisions of SFAS No. 141 eÅective January 1, 2002. The
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