eBay 2006 Annual Report Download - page 32

among other things, failure to resolve account restrictions promptly. If PayPal is unable to provide quality customer
support operations in a cost-effective manner, PayPal’s users may have negative experiences, PayPal may receive
additional negative publicity, its ability to attract new customers may be damaged, and it could become subject to
additional litigation. As a result, current and future revenues could suffer, or its operating margins may decrease. In
addition, negative publicity about or experiences with PayPal’s customer support could cause eBay’s reputation to
suffer or affect consumer confidence in the eBay brands as a whole.
Problems with third parties who provide services to us or to our users could harm our business.
A number of parties provide services to us or to our users that benefit us. Such services include seller tools that
automate and manage listings, merchant tools that manage listings and interface with inventory management
software, storefronts that help our users list items, and caching services that make our sites load faster, among
others. In some cases we have contractual agreements with these companies that give us a direct financial interest in
their success, while in other cases we have none. PayPal is dependent on the processing companies and banks that
link PayPal to the credit card and bank clearing networks. Financial, regulatory, or other problems that prevent these
companies from providing services to us or our users could reduce the number of listings on our websites or make
completing transactions or payments on our websites more difficult, and thereby harm our business. Any security
breach at one of these companies could also affect our customers and harm our business. Although we generally
have been able to renew or extend the terms of contractual arrangements with these third party service providers on
acceptable terms, there can be no assurance that we will continue to be able to do so in the future.
We depend on key personnel.
Our future performance depends substantially on the continued services of our senior management and other
key personnel and our ability to retain and motivate them. The loss of the services of any of our executive officers or
other key employees could harm our business. We do not have long-term employment agreements with any of our
key personnel, we do not maintain any “key person” life insurance policies, and our Chief Executive Officer and
many other members of our senior management team have fully vested the vast majority of their in-the-money
equity incentives. Our new businesses all depend on attracting and retaining key personnel. Our future success also
will depend on our ability to attract, train, retain and motivate highly skilled technical, managerial, marketing, and
customer support personnel. Competition for these personnel is intense, and we may be unable to successfully
attract, integrate, or retain sufficiently qualified personnel. In making employment decisions, particularly in the
Internet and high-technology industries, job candidates often consider the value of the stock options they are to
receive in connection with their employment. Fluctuations in our stock price may make it more difficult to retain
and motivate employees whose stock option strike prices are substantially above current market prices. Similarly,
decreases in the number of unvested in-the-money stock options held by existing employees, whether because our
stock price has declined, options have vested, or because the size of follow-on option grants has declined, may make
it more difficult to retain and motivate employees.
Skype’s future success depends substantially upon the continued services of its senior management and key
personnel, and the loss of their services could harm our business. Several key members of Skype’s engineering team
are consultants, not full-time employees, who provide services to us and third parties. A number of Skype’s
employees had equity in Skype prior to its acquisition by eBay. Skype equity holders were given the option of
receiving their portion of the acquisition consideration in the form of a lump-sum up- front payment or receiving a
lower up-front payment in exchange for the possibility of receiving additional consideration in the form of potential
earn-out payments tied to the achievement of certain performance targets prior to June 30, 2009. Several key
members of Skype’s senior management and key employees chose to receive less up-front consideration in
exchange for the possibility of receiving the performance-based earn-out payments. Although eligible Skype
employees have also been granted eBay stock options, the earn-out payments are not tied to continued employment
with Skype or eBay, and key Skype employees may choose to depart because of differences in corporate culture,
because they believe the earn-out targets will be achieved without their contributions, or because they believe the
earn-out targets are not achievable. The loss of the services of any of Skype’s senior management or key personnel
could delay the development and introduction of new features and products, and could harm our ability to grow
Skype’s business.
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