eBay 2012 Annual Report Download - page 81

Download and view the complete annual report

Please find page 81 of the 2012 eBay annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 162

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162

Investments in both fixed-rate and floating-rate interest-earning instruments carry varying degrees of interest rate risk. The fair market
value of our fixed-rate investment securities may be adversely impacted due to a rise in interest rates. In general, fixed-
rate securities with longer
maturities are subject to greater interest-rate risk than those with shorter maturities. While floating rate securities generally are subject to less
interest-rate risk than fixed-rate securities, floating-rate securities may produce less income than expected if interest rates decrease and may also
suffer a decline in market value if interest rates increase. Due in part to these factors, our investment income may fall short of expectations or we
may suffer losses in principal if securities are sold that have declined in market value due to changes in interest rates. As of December 31, 2012 ,
the balance of our government bond and corporate debt security portfolio was $3.9 billion , which represented approximately 31% of our total
cash and investment portfolio. As of December 31, 2012 , our government bond and corporate debt security portfolio earned an average pretax
yield of approximately
1.62% , with a weighted average maturity of 24 months. If interest rates at the end of the year were 100 basis points
higher (lower), the fair market value of our total fixed-income investment portfolio as of December 31, 2012 could have decreased (increased)
by approximately $58 million .
Investment Risk
As of December 31, 2012 , our cost and equity method investments totaled $327 million , which represented approximately 3%
of our total
cash and investment portfolio and were primarily related to equity method investments in privately held companies. We review our investments
for impairment when events and circumstances indicate a decline in fair value of such assets below carrying value is other-than-temporary. Our
analysis includes a review of recent operating results and trends, recent sales/acquisitions of the securities in which we have invested and other
publicly available data. During 2012, we did not record any material impairment on our cost or equity method investments.
Equity Price Risk
We are exposed to equity price risk on marketable equity instruments due to market volatility. At December 31, 2012 , the total fair value
of our marketable equity instruments (primarily related to our equity holdings in MercadoLibre) was $638 million , which represented
approximately 5% of our total cash and investment portfolio.
European Debt Exposures
We actively monitor our exposure to the European markets, including the impact of sovereign debt issues associated with Greece, Ireland,
Portugal, Italy and Spain. As of December 31, 2012 , we did not have any direct investments in the sovereign debt, of these countries or in debt
securities issued by corporations or financial institutions organized in these countries. We maintain a small number of operating bank accounts
with Spanish, Italian and Portuguese banks that have balances that we do not consider material.
77