eBay 2006 Annual Report Download - page 47

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Overview
About eBay Inc.
We operate three primary business segments, Marketplaces, Payments and Communications. We provide
online marketplaces for the sale of goods and services, online payments services and online communication
offerings to a diverse community of individuals and businesses. Our Marketplaces segment provides the infra-
structure to enable online commerce in a variety of platforms, including the traditional eBay.com platform, along
with our other online platforms, such as Shopping.com, classifieds websites and Rent.com. Our wide array of
marketplaces websites brings together millions of buyers and sellers every day on a local, national and international
basis. Our Payments segment, which consists of PayPal, enables individuals or businesses to securely, easily and
quickly send and receive payments online. Our Communications segment, which consists of Skype, enables VoIP
calls between Skype users, and also provides Skype users low-cost connectivity to traditional fixed-line and mobile
telephones.
Executive Operating and Financial Summary
Our focus is on key operating and financial metrics
Members of our senior management team regularly review key operating metrics such as registered users,
active users, listings, gross merchandise volume, eBay stores, total accounts, active accounts, total number of
payments, total payment volume, and transaction rates. Members of our senior management also regularly review
key financial information including net revenues, operating income margins, earnings per share, cash flows from
operations and free cash flows, which we define as operating cash flows less purchases of property and equipment,
net. These operating and financial measures allow us to monitor the health and vibrancy of our Marketplaces,
Payments, and Communications segments and the profitability of our business and to evaluate the effectiveness of
investments that we have made and continue to make in the areas of marketing, product development, international
expansion, customer support and site operations. We believe that an understanding of these key operating and
financial measures and how they change over time is important to investors, analysts and other parties analyzing our
business results and future market opportunities.
2006 summary
In 2006, we generated nearly $6.0 billion in net revenues, representing a 31% year-over-year growth rate; we
earned nearly $1.4 billion in operating income; and we closed the year with $3.5 billion in cash, cash equivalents
and investments after taking into account the repurchase of approximately 54.5 million shares of our common stock
for an aggregate purchase price of $1.7 billion. During 2006, we focused on integrating the businesses we acquired
in 2005, which allowed us to strengthen our leadership position in each of our three key business areas in the U.S.
and abroad. We expanded our user base in all three business segments, and as of December 31, 2006 we had
222 million eBay registered users; 133 million PayPal accounts; and 171 million Skype registered users.
Our expectations for growth
We expect that growth in our net revenues during 2007 will result primarily from increased net transaction
revenues across our Marketplaces, Payments and Communications segments. We expect to continue our invest-
ments in the areas of product development, customer support and international expansion across all segments. We
believe these investments are necessary to support the long-term demands of our growing business. In addition, to
the extent that the U.S. dollar fluctuates against foreign currencies, and, in particular, the Euro, British pound and
Korean won, the remeasurement of these foreign currency denominated transactions into U.S. dollars will impact
our consolidated net revenues and, to the extent that they are not hedged successfully, our net income.
The discussion of our consolidated financial results contained herein is intended to assist those reading this
report to better understand the key operating and financial measures summarized above as well as the changes in our
consolidated results of operations from year to year, and the primary factors that accounted for those changes.
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