eBay Q4-2007 Earnings Slides
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eBay Q4-2007 Earnings Slides

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Presented on 23 January 2008

Presented on 23 January 2008

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  • 1. Q4 2007 Financial Highlights January 23, 2008 ®
  • 2. This presentation contains non-GAAP measures relating to the company's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in the appendix at the end of this presentation. This presentation may make forward-looking statements regarding matters that involve risk and uncertainty, including those relating to the company’s ability to grow its businesses, user base and user activity. Our actual results may differ materially from those discussed in this call for a variety of reasons, including our increasing need to grow revenues from existing users in established markets, an increasingly competitive environment for our businesses, the complexity of managing a growing company with a broad range of businesses, regulatory, tax, as well as IP and other litigation risks (including risks specific to PayPal and the financial industry, and risks specific to Skype’s technology and to the VoiP industry), our need to upgrade our technology and customer service infrastructure at reasonable cost while adding new features and maintaining site stability, foreign-exchange-rate fluctuations, changes in political, business, and economic conditions, and the impact and integration of recent and future acquisitions. You can find more information about factors that could affect our results in our annual report on our Form 10-K and our quarterly reports on Form 10-Q (available at http://investor.ebay.com). You should not unduly rely on any forward-looking statements, and we assume no obligation to update them. All information in the presentation is as of January 23, 2008, and we do not intend, and undertake no duty, to update this presentation. ® 1
  • 3. Q4 07 Summary Very good quarter financially … • Strong revenue growth… first $2B quarter • Stronger non-GAAP earnings growth • Excellent free cash flow • Share repurchases: >$300M in Q4… ~$3.2B since July ’06 • Approved for additional $2B share repurchase program • Caps off extremely strong year financially ® 2
  • 4. Q4 07 Summary… Strong Top-line Growth Revenue (in $millions) 2,181 1,889 1,834 1,768 1,720 1,390 1,411 1,449 1,329 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Reported Y/Y Growth 42% 35% 30% 31% 29% 27% 30% 30% 27% Organic Y/Y Growth 34% 30% 21% 20% 21% 21% 23% 23% 18% ® 3 Note: Calculation of Organic Y/Y growth is included in the Appendix of this presentation
  • 5. Q4 07 Summary... Stronger Earnings Growth Non-GAAP EPS (in $) 0.45 0.41* 0.33 0.34 0.31 0.26 0.24 0.24 0.24 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Reported Y/Y Growth 44% 20% 10% 28% 29% 39% 40% 59% 45% Non-GAAP Op. Margin 34.0% 33.1% 32.6% 32.1% 33.4% 33.6% 32.4% 31.4% 34.6% ® Note: Calculations of Non-GAAP EPS and Non-GAAP Op. Margins are included in the Appendix of this presentation 4 *$0.04 EPS from one-time tax benefit
  • 6. Q4 07 Summary… Excellent Free Cash Flow Generation Free Cash Flow (in $millions) 665 529 533 510 479 451 428 367 385 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Reported Y/Y Growth 44% 56% -10% -14% 24% 6% 45% 32% 26% Capex % of Revenue 7% 10% 11% 9% 6% 5% 7% 6% 6% FCF % of Revenue 32% 32% 26% 27% 31% 27% 29% 27% 30% ® 5 Note: Calculation of FCF is included in the Appendix of this presentation
  • 7. Business Update… Marketplaces Revenue and Volume Revenue GMV ($millions) ($billions) Int’l US 8.9 806 7.7 7.5 7.8 7.7 673 678 6.5 624 638 509 643 697 6.8 6.7 6.7 6.7 7.3 540 614 613 617 6.1 Q306 Q406 Q107 Q207 Q307 Q407 Q306 Q406 Q107 Q207 Q307 Q407 $ millions $ billions 1,049 1,238 1,250 1,291 1,321 1,503 12.6 14.4 14.3 14.5 14.4 16.2 y/y growth y/y growth 22% 24% 23% 26% 26% 21% 17% 20% 14% 12% 14% 12% ® 6
  • 8. Business Update… Marketplaces Operating Metrics Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Active Users (in millions) Active user growth ex-China/ Global Active Users* 79.8 81.8 82.9 83.3 83.0 83.2 Taiwan was 7% y/y. Y/Y Growth 17% 14% 10% 7% 4% 2% Focus on re-engaging users New Listings (in millions) US 261 272 258 244 254 281 Y/Y Growth 16% 4% -2% -8% -2% 3% Int’l listings ex-China/Taiwan Int'l 323 339 330 316 301 357 grew 10% y/y Y/Y Growth 38% 19% 6% -5% -7% 5% Global listings ex-China/ Taiwan grew 7% y/y Total Listings 584 610 588 559 556 637 Y/Y Growth 27% 12% 2% -6% -5% 4% GMV (in $millions) US 6,112 6,777 6,736 6,700 6,729 7,331 Y/Y Growth 13% 14% 8% 10% 10% 8% Int'l 6,528 7,657 7,545 7,764 7,666 8,883 Y/Y Growth 21% 26% 20% 14% 17% 16% Int’l exposure increasingly Fx Neutral Y/Y Growth 16% 17% 11% 8% 9% 8% important Total GMV 12,639 14,434 14,281 14,464 14,395 16,213 Y/Y Growth 17% 20% 14% 12% 14% 12% Fx Neutral Y/Y Growth 15% 16% 10% 9% 9% 8% Notes: •*Global active users number reflects all users, excluding users of StubHub, Half.com and IAC, who bid on, bought, or listed an item within the ® 7 previous 12-month period. •More information on these metrics can be found on Page 10 of our Earnings Press Release dated January 23, 2008
  • 9. Q4 Listings to Marketplaces Revenue Walk 0.4% 5.2% • Shopping.com • Classifieds 3.4% • Advertising 21.3% 4.3% 0.4% 3.1% 12.3% 4.4% New Listings China/Taiwan Conversion FX Q4'07 Y/Y GMV StubHub Non-GMV Biz Pricing, Q4'07 Y/Y Growth StubHub Rate & ASP Growth China/Taiwan Format Shift, Revenue Other Growth ® 8
  • 10. Diversifying Marketplaces Revenue Streams Shopping.com Advertising* Classifieds +26% +182% +104% Q4 06 Q4 07 Q4 06 Q4 07 Q4 06 Q4 07 ® 9 *Advertising revenue represents all Advertising from Marketplaces, excluding “Other” revenue and advertising realized on Shopping.com and Classifieds sites
  • 11. Pricing… Listening and Responding to Buyers and Sellers Lower prices will stimulate marketplace supply – enhance selection Hypotheses Photos will enhance buyer experience onsite Reduction in Final Value Fee (back end) Reduction in Insertion Fee (front end) Primary Tests Free Gallery Photo Impact on key metrics Minimal in Final Value test (A) Observations Good lift in Insertion Fee test (A) Conversion improvement in Free Gallery test Sellers more interested in reducing upfront fee risk… back-end success fee reductions are secondary Conclusions Buyers like pervasive photos across all listings New 2008 Price Restructure … specifically addresses our conclusions Action Plan Announcement upcoming to Sellers next week ® 10 (A) Key Metrics include New Listings and Sold Items.
  • 12. Business Update… PayPal Revenue and Volume Revenue Net TPV ($millions) ($billions) Int’l US 4.9 246 3.5 3.7 3.9 189 201 3.4 179 169 2.7 133 9.1 316 7.0 7.2 7.4 7.7 248 260 265 270 6.0 216 Q306 Q406 Q107 Q207 Q307 Q407 Q306 Q406 Q107 Q207 Q307 Q407 $ millions $ billions 350 417 439 454 470 563 8.6 10.4 10.8 11.1 11.6 14.0 y/y growth y/y growth 41% 37% 31% 34% 35% 35% 37% 36% 30% 32% 34% 35% ® 11
  • 13. Business Update… PayPal Operating Metrics Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Active Registered Accounts (in millions) Global Active Accounts 47.2 49.4 51.3 52.8 54.8 57.3 Holiday promotions helped Y/Y Growth 21% 20% 18% 16% 16% 16% drive active user growth Net TPV (in $millions) On eBay 5,516 6,754 6,665 6,460 6,513 7,928 Y/Y Growth 27% 26% 19% 18% 18% 17% Merchant Services 3,129 3,686 4,112 4,621 5,055 6,116 Third consecutive quarter of Y/Y Growth 59% 56% 50% 57% 62% 66% accelerating TPV Total Net TPV 8,645 10,439 10,777 11,080 11,569 14,044 Y/Y Growth 37% 36% 30% 32% 34% 35% On-eBay Penetration Rate Continued benefits from Global 50.7% 51.6% 52.3% 51.9% 53.6% 54.0% synergies Transaction rates Transaction exp 1.13% 1.13% 1.15% 1.18% 1.21% 1.18% Leveraging technology to minimize transaction loss Transaction loss 0.37% 0.43% 0.33% 0.31% 0.27% 0.27% Notes: •Global Active Registered Accounts reflects all registered accounts, excluding non registered users, that successfully sent or received at least one payment or payment reversal through PayPal within the previous 12-month period. •TPV has been adjusted to Net TPV, which is the total dollar volume of payments, net of payment reversals successfully completed through the PayPal system during the quarter, excluding the payment gateway business. •Transaction exp and transaction loss are expressed as % of Net TPV. •Penetration Rate has been adjusted to reflect the total dollar volume of addressable GMV paid using PayPal in relation to the total dollar volume of addressable GMV. ® 12 •More information on these metrics can be found on Page 11 of our Earnings Press Release dated January 23, 2008
  • 14. Business Update… Skype Revenue and Operating Metrics Revenue ($millions and Y/Y growth) Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Registered Users (in millions) 136 171 196 220 246 276 Y/Y Growth -- 129% 107% 94% 81% 61% Skype to Skype Minutes (in billions) 7.5 9.5 10.9 10.8 9.8 11.9 115 Y/Y Growth -- 80% 53% 41% 31% 26% 98 90 79 66 Skype Out Minutes (in billions) 1.1 1.5 1.3 1.3 1.4 1.6 50 Y/Y Growth -- 182% 98% 57% 25% 10% Q306 Q406 Q107 Q207 Q307 Q407 y/y growth 123% 103% 96% 76% Notes: • Total user number reflects users that may have registered through non-Skype based web sites. ® 13 • Skype-to-Skype minutes are estimated; prior period amounts are updated to conform to current estimation methodology. • More information on these metrics can be found on Page 12 of our Earnings Press Release dated January 23, 2008.
  • 15. Total Non-GAAP Operating Expenses Sales & Marketing Product Development General & Admin. (% of Revenue) (% of Revenue) (% of Revenue) 25.6% 14.4% 6.9% 6.5% 12.9% 23.0% Q406 Q407 Q406 Q407 Q406 Q407 • Leveraged technology • Improvements to buyer • Leveraged existing • Positive mix shift experience infrastructure • Product enhancements Q4 Non-GAAP Op Inc: $755M +31% Q4 Non-GAAP Net Inc: $611M +42% ® 14
  • 16. Q4 07 Cash Flow / Capital Allocation… Share Repurchase Update Cash Balance / Flows Free Cash Flow / Other Movements (in $billions) • Strong free cash flow driven by earnings expansion 0.3 • $128M in capital expenditures 0.7 0.5 0.7 • Proceeds from stock option exercises • Skype earn-out… settled in Q3, paid in Q4 5.0 4.4 Q4 Share Repurchases • Repurchased ~9 million shares at an average price of ~$33.83 Q307 Ending FCF Equity Gains* / Share Skype Earnout Q407 Ending Cash Option Repurchase Cash Exercise / Other ® Note: Cash balance includes cash, cash equivalents and investments 15 *Equity Gains include changes in market value of minority stake in MercadoLibre
  • 17. FY 07 Summary… Great Year Financially (in $millions) Revenues (in $) EPS Free Cash Flow (in $millions) 2,187 1.53* 7,672 1,732 5,970 1,574 1.05 4,552 0.86 FY 05 FY 06 FY 07 FY 05 FY 06 FY 07 FY 05 FY 06 FY 07 Reported Y/Y Growth 39% 31% 29% 42% 21% 46% 59% 10% 26% Reported Non-GAAP Op. Margin 35.5% 32.8% 33.1% ® Note: Calculation of Non-GAAP EPS, Non-GAAP Op. Margin, and FCF is included in the Appendix of this presentation 16 *FY 07 EPS includes one-time $0.04 tax benefit
  • 18. Guidance Summary Q108 2008 Financial Guidance Revenues (in millions) $2,000 - 2,050 $8,500 - 8,750 Non-GAAP Operating Margin -- ~32% Non-GAAP EPS $0.37 - 0.39 $1.63 - 1.67 Free Cash Flow (in millions) -- $2,300 - $2,400 Guidance Assumptions Non-GAAP Tax Rate -- 22 - 23% Capex % of Revenue -- 6.5 - 7.0% ® 17
  • 19. Summary • Carry momentum into 2008 • Understand challenges ahead • Focus on executing strategy Investing to extend leadership position Diversifying revenue streams ® 18
  • 20. Q&A ® 19
  • 21. Appendix ® 20
  • 22. Q4 07 Top Line Growth… EPS Expansion FX +$0.02 +27% 2,181 $0.05 + 3 pts acquisition + 6 pts FX $0.04 1,720 $0.05 +45% $0.45 $0.31 Q406 Q407 Q406 Top Line Growth / Productivity > Capital Allocation / Q407 Mix Investment Tax Rate Non-GAAP 33.4% -2.6% 3.8% 34.6% Op Margin % ® Note: See Appendix for reconciliation of Non-GAAP Op Margin 21
  • 23. Calculation of Organic Revenue Growth Mar 31, Jun 30, Sept 30, Dec 31, 2005 2005 2005 2005 Total revenue growth 36% 40% 37% 42% Acquisition impact (3%) (2%) (5%) (11%) Foreign currency impact (3%) (3%) - 3% Total organic revenue growth 30% 35% 32% 34% Mar 31, Jun 30, Sep 30, Dec 31, 2006 2006 2006 2006 Total revenue growth 35% 30% 31% 29% Acquisition impact (10%) (9%) (9%) (3%) Foreign currency impact 5% - (2%) (5%) Total organic revenue growth 30% 21% 20% 21% Mar 31, June 30, Sept 30, Dec 31, 2007 2007 2007 2007 Total revenue growth 27% 30% 30% 27% Acquisition impact (1%) (3%) (3%) (3%) Foreign currency impact (5%) (4%) (4%) (6%) Total organic revenue growth 21% 23% 23% 18% ® Note: Acquisition impact includes acquisitions made within 12 months of the quarter 22
  • 24. Reconciliation of GAAP to Non-GAAP Net Income / EPS Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, June 30, Sept 30, Dec 31, 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 (in millions, except per share data) GAAP net income (loss) $ 256.3 $ 291.6 $ 255.0 $ 279.2 $ 248.3 $ 250.0 $ 280.9 $ 346.5 $ 377.2 $ 375.8 $ (935.6) $ 530.9 Stock-based compensation expense related to employee stock options and purchases 3.6 0.1 5.3 22.8 83.8 85.4 73.5 74.7 72.0 79.6 80.6 69.7 Payroll tax on stock option exercises 5.7 1.5 2.3 3.5 2.3 1.6 0.4 0.9 1.8 1.3 2.3 1.5 Amortization of acquired (1) intangible assets 22.5 25.8 29.2 51.4 51.9 62.0 51.5 49.5 51.8 56.9 57.3 57.7 Impairment of goodwill - - - - - - - - - - 1,390.9 - Gain on sale of equity investment - (2.3) - - - - - - - - - - Income taxes associated with certain non-GAAP entries (12.6) (9.5) (11.6) (16.8) (43.4) (48.3) (38.9) (41.0) (42.3) (42.5) (31.7) (48.9) Non-GAAP net income $ 275.5 $ 307.2 $ 280.2 $ 340.1 $ 342.9 $ 350.7 $ 367.4 $ 430.5 $ 460.5 $ 471.1 $ 563.8 $ 610.9 Non-GAAP net income per diluted share $ 0.20 $ 0.22 $ 0.20 $ 0.24 $ 0.24 $ 0.24 $ 0.26 $ 0.31 $ 0.33 $ 0.34 $ 0.41 $ 0.45 Shares used in non-GAAP diluted share calculation 1,382 1,379 1,387 1,426 1,438 1,436 1,426 1,403 1,384 1,379 1,373 1,368 (1) Includes amortization of developed technology classified in cost of net revenues. ® 23
  • 25. Reconciliation of GAAP to Non-GAAP Operating Margin Mar 31, Jun 30, Sept 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sept 30, Dec 31, 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 (in millions) GAAP operating income (loss) $ 335.6 $ 379.0 $ 356.8 $ 370.4 $ 322.7 $ 311.4 $ 339.1 $ 449.9 $ 467.8 $ 456.8 $ (937.7) $ 626.1 Stock-based compensation expense related to employee stock options and purchases 3.6 0.1 5.3 22.8 83.8 85.4 73.5 74.7 72.0 79.6 80.6 69.7 Payroll tax on stock option exercises 5.7 1.5 2.3 3.5 2.3 1.6 0.4 0.9 1.8 1.3 2.3 1.5 Amortization of acquired intangible assets (1) 22.5 25.8 29.2 51.4 51.9 62.0 51.5 49.5 51.8 56.9 57.3 57.7 Impairment of goodwill - - - - - - - - - - 1,390.9 - Non-GAAP operating income $ 367.4 $ 406.4 $ 393.6 $ 448.1 $ 460.7 $ 460.4 $ 464.5 $ 575.0 $ 593.4 $ 594.6 $ 593.4 $ 755.0 Revenues $ 1,032 $ 1,086 $ 1,106 $ 1,329 $ 1,390 $ 1,411 $ 1,449 $ 1,720 $ 1,768 $ 1,834 $ 1,889 $ 2,181 GAAP operating margin 33% 35% 32% 28% 23% 22% 23% 26% 26% 25% (50%) 29% Non-GAAP operating margin 36% 37% 36% 34% 33% 33% 32% 33% 34% 32% 31% 35% (1) Includes amortization of developed technology classified in cost of net revenues. ® 24
  • 26. Calculation of Free Cash Flow Mar 31, Jun 30, Sept 30, Dec 31, Full Year 2005 2005 2005 2005 2005 GAAP operating cash flow $ 495.4 $ 496.5 $ 491.7 $ 526.2 $ 2,009.8 Purchases of property and equipment, net (79.6) (90.5) (70.5) (97.7) (338.3) Proceeds from sale of corporate aircraft - - 28.3 - 28.3 Payment of headquarters facility lease obligation (126.4) - - - (126.4) Free cash flow $ 289.4 $ 406.0 $ 449.5 $ 428.5 $ 1,573.4 Mar 31, Jun 30, Sept 30, Dec 31, Full Year 2006 2006 2006 2006 2006 GAAP operating cash flow $ 584.2 $ 515.5 $ 522.1 $ 626.0 $ 2,247.8 Purchases of property and equipment, net (133.6) (148.4) (136.9) (96.6) (515.5) Free cash flow $ 450.6 $ 367.1 $ 385.2 $ 529.4 $ 1,732.3 Mar 31, Jun 30, Sept 30, Dec 31, Full Year 2007 2007 2007 2007 2007 GAAP operating cash flow $ 564.5 $ 654.6 $ 629.5 $ 792.5 $ 2,641.1 Purchases of property and equipment, net (85.4) (121.3) (119.3) (127.9) (454.0) Free cash flow $ 479.1 $ 533.3 $ 510.2 $ 664.6 $ 2,187.1 ® 25
  • 27. Reconciliation of GAAP to Non-GAAP Quarterly Statement of Income Three Months Ended Three Months Ended Dec 31, 2006 Dec 31, 2007 (in millions, except per share data) Reported Non-GAAP Entries Non-GAAP Reported Non-GAAP Entries Non-GAAP Net revenues $ 1,719.9 $ - $ 1,719.9 $ 2,180.6 $ - $ 2,180.6 Cost of net revenues 356.3 (7.9) (a) 344.3 506.0 (9.5) (a) 492.2 (4.1) (c) (4.3) (c) Gross Profit 1,363.6 12.0 1,375.6 1,674.6 13.8 1,688.4 Operating expenses: Sales and marketing 461.3 (21.6) (a) 439.7 519.1 (16.8) (a) 502.3 Product development 131.3 (18.8) (a) 112.5 169.3 (19.3) (a) 150.0 General and administrative 275.7 (26.4) (a) 248.4 306.7 (24.1) (a) 281.1 (0.9) (b) (1.5) (b) Amortization of acquired intangible assets 45.4 (45.4) (c) - 53.3 (53.3) (c) - Impairment of goodwill - - - - - - Total operating expense 913.7 (113.1) 800.6 1,048.4 (115.0) 933.4 Income from operations 449.9 125.1 575.0 626.2 128.8 755.0 Interest and other income, net 37.4 - 37.4 51.9 - 51.9 Interest expense (3.7) - (3.7) (6.6) - (6.6) Income before income taxes 483.6 125.1 608.7 671.5 128.8 800.3 Provision for income taxes (137.1) (41.0) (d) (178.1) (140.6) (48.9) (d) (189.5) Net income $ 346.5 $ 84.1 $ 430.6 $ 530.9 $ 79.9 $ 610.8 Net income per share: Basic $ 0.25 $ 0.31 $ 0.39 $ 0.45 Diluted $ 0.25 $ 0.31 $ 0.39 $ 0.45 Weighted average shares: Basic 1,381 1,381 1,352 1,352 Diluted 1,403 1,403 1,368 1,368 Operating margin 26% 7% 33% 29% 6% 35% Effective tax rate 28% 1% 29% 21% 3% 24% ____________________ Notes: (a) Stock-based compensation (b) Employer payroll taxes on employee non-qualified stock option grants (c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-GAAP entries ® 26
  • 28. Reconciliation of GAAP to Non-GAAP Annual Statement of Income Year Ended Year Ended December 31, 2006 December 31, 2007 Reported Non-GAAP Entries Non-GAAP Reported Non-GAAP Entries Non-GAAP Net revenues $ 5,969.7 $ - $ 5,969.7 $ 7,672.3 $ - $ 7,672.3 Cost of net revenues 1,256.7 (33.0) (a) 1,205.9 1,763.0 (37.0) (a) 1,706.4 (17.8) (c) (19.6) (c) Gross Profit 4,713.0 50.8 4,763.8 5,909.3 56.6 5,965.9 Operating expenses: Sales and marketing 1,619.8 (96.5) (a) 1,523.3 1,925.4 (81.3) (a) 1,844.1 Product development 494.7 (81.5) (a) 413.2 619.7 (76.0) (a) 543.7 General and administrative 978.4 (106.4) (a) 866.7 1,156.0 (107.6) (a) 1,041.6 (5.3) (b) (6.8) (b) Amortization of acquired intangible assets 197.1 (197.1) (c) - 204.1 (204.1) (c) - Impairment of goodwill - - 1,390.9 (1,390.9) (e) - Total operating expense 3,290.0 (486.8) 2,803.2 5,296.1 (1,866.7) 3,429.4 Income from operations 1,423.0 537.6 1,960.6 613.2 1,923.3 2,536.5 Interest and other income, net 130.0 - 130.0 154.3 - 154.3 Interest expense (5.9) - (5.9) (16.6) - (16.6) Income before income taxes 1,547.1 537.6 2,084.7 750.9 1,923.3 2,674.2 Provision for income taxes (421.4) (171.7) (d) (593.1) (402.6) (165.4) (d) (568.0) Net income $ 1,125.7 $ 365.9 $ 1,491.6 $ 348.3 $ 1,757.9 $ 2,106.2 Net income per share: Basic $ 0.80 $ 1.07 $ 0.26 $ 1.55 Diluted $ 0.79 $ 1.05 $ 0.25 $ 1.53 Weighted average shares: Basic 1,399 1,399 1,359 1,359 Diluted 1,425 1,425 1,376 1,376 Operating margin 24% 9% 33% 8% 25% 33% Effective tax rate 27% 1% 28% 54% (33%) 21% ____________________ Notes: (a) Stock-based compensation (b) Employer payroll taxes on employee non-qualified stock option grants (c) Amortization of acquired intangible assets and developed technology (d) Income taxes associated with certain non-GAAP entries (e) Impairment of goodwill ® 27
  • 29. Reconciliation of GAAP to Non-GAAP Guidance Three Months Ended Year Ended March 31, 2008 December 31, 2008 (in millions, except per share amounts and percentages) GAAP Non-GAAP (a) GAAP Non-GAAP (a) Revenues $2,000 - $2,050 $2,000 - $2,050 $8,500 -$8,750 $8,500 -$8,750 Operating Margin - - ~24% ~32% Diluted EPS $0.28 - $0.30 $0.37 - $0.39 $1.27 - $1.31 $1.63 - $1.67 Effective Tax Rate - - 21.0% - 22.0% 22.0% - 23.0% (a) Non-GAAP guidance reflects estimated quarterly adjustments to exclude the amortization of acquired intangible assets of approximately $55-$60 million and stock-based compensation and payroll taxes on employee stock options of approximately $95-$110 million. ® 28