eBay (EBAY) 10-Q 28 Apr 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 14, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	EBAY
Entity Registrant Name	EBAY INC
Entity Central Index Key	0001065088
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,306,969,862

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEET (USD $)
In Thousands	Mar. 31, 2010	Dec. 31, 2009
Current assets:
Cash and cash equivalents	$3,593,003	$3,999,818
Short-term investments	934,898	943,986
Accounts receivable, net	393,414	407,507
Loans and interest receivable, net	595,268	622,846
Funds receivable and customer accounts	2,315,160	2,157,945
Other current assets	445,695	328,106
Total current assets	8,277,438	8,460,208
Long-term investments	1,977,567	1,381,765
Property and equipment, net	1,346,850	1,314,328
Goodwill	6,130,156	6,143,086
Intangible assets, net	703,153	767,812
Other assets	255,014	341,121
Total assets	18,690,178	18,408,320
Current liabilities:
Accounts payable	144,266	192,412
Funds payable and amounts due to customers	2,315,160	2,157,945
Accrued expenses and other current liabilities	970,881	981,784
Deferred revenue and customer advances	98,123	99,305
Income taxes payable	58,581	210,522
Total current liabilities	3,587,011	3,641,968
Deferred and other tax liabilities, net	928,460	929,143
Other liabilities	49,598	49,561
Total liabilities	4,565,069	4,620,672
Stockholders' equity:
Common stock, $0.001 par value; 3,580,000 shares authorized; 1,297,799 and 1,306,855 shares outstanding	1,495	1,486
Additional paid-in capital	10,069,834	9,986,199
Treasury stock at cost, 188,251 and 188,260 shares	(5,377,490)	(5,377,258)
Retained earnings	8,756,770	8,359,117
Accumulated other comprehensive income	674,500	818,104
Total stockholders' equity	14,125,109	13,787,648
Total liabilities and stockholders' equity	$18,690,178	$18,408,320

1_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)
Share data in Thousands	Mar. 31, 2010	Dec. 31, 2009
Common stock, par value	0.001	0.001
Common stock, shares authorized	3,580,000	3,580,000
Common stock, shares outstanding	1,306,855	1,297,799
Treasury stock at cost, shares	188,260	188,251

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENT OF INCOME (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net revenues	$2,196,057	$2,020,586
Cost of net revenues	606,555	573,386
Gross profit	1,589,502	1,447,200
Operating expenses:
Sales and marketing	446,161	403,316
Product development	210,139	201,516
General and administrative	276,743	268,291
Provision for transaction and loan losses	106,029	81,234
Amortization of acquired intangible assets	53,252	63,468
Restructuring	8,569	6,611
Total operating expenses	1,100,893	1,024,436
Income from operations	488,609	422,764
Interest and other income, net	6,046	18,092
Income before income taxes	494,655	440,856
Provision for income taxes	(97,002)	(83,743)
Net income	$397,653	$357,113
Net income per share:
Basic	0.31	0.28
Diluted	0.3	0.28
Weighted average shares:
Basic	1,301,248	1,283,810
Diluted	1,326,021	1,287,814

2_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) INCOME (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net income	$397,653	$357,113
Other comprehensive income:
Foreign currency translation	(154,715)	(396,218)
Unrealized gains (losses) on investments, net	(27,887)	17,291
Unrealized gains on hedging activities	28,123	935
Tax (provision) benefit on above items	10,875	(6,854)
Net change in accumulated other comprehensive income	(143,604)	(384,846)
Comprehensive (loss) income	$254,049	($27,733)

3_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash flows from operating activities:
Net income	$397,653	$357,113
Adjustments:
Provision for transaction and loan losses	106,029	81,234
Depreciation and amortization	188,022	197,289
Stock-based compensation	102,069	113,846
Changes in assets and liabilities	(375,511)	(80,955)
Net cash provided by operating activities	418,262	668,527
Cash flows from investing activities:
Purchases of property and equipment, net	(152,256)	(90,934)
Changes in principal loans receivable, net	15,650	46,204
Purchases of investments	(944,393)	(13,594)
Maturities and sales of investments	259,446	5,944
Repayment of Skype note receivable	125,000
Other	(4,416)	321
Net cash used in investing activities	(700,969)	(52,059)
Cash flows from financing activities:
Proceeds from issuance of common stock, net	42,117	2,826
Excess tax benefits from stock-based compensation	20,993	2
Tax withholdings related to net share settlements of restricted stock awards and units	(70,500)	(17,348)
Net payments from borrowings under credit agreement		(600,000)
Funds receivable and customer accounts	(157,215)	(116,796)
Funds payable and amounts due to customers	157,215	116,796
Net cash used in financing activities	(7,390)	(614,520)
Effect of exchange rate changes on cash and cash equivalents	(116,718)	(133,717)
Net decrease in cash and cash equivalents	(406,815)	(131,769)
Cash and cash equivalents at beginning of period	3,999,818	3,188,928
Cash and cash equivalents at end of period	3,593,003	3,057,159
Supplemental cash flow disclosures:
Cash paid for interest		2,994
Cash paid for income taxes	$311,442	$133,162

The Company and Summary of Sign

The Company and Summary of Significant Accounting Policies
	3 Months Ended Mar. 31, 2010
The Company and Summary of Significant Accounting Policies	Note1 The Company and Summary of Significant Accounting Policies The Company eBay Inc. (eBay) was incorporated in California in May 1996, and reincorporated in Delaware in April 1998. eBays purpose is to pioneer new communities around the world, built on commerce, sustained by trust and inspired by opportunity. eBay brings together millions of buyers and sellers every day on a local, national and international basis through an array of websites. eBay provides online marketplaces for the sale of goods and services as well as other online commerce, or ecommerce, platforms and online payment services to a diverse community of individuals and businesses. We currently operate two primary business segments: Marketplaces and Payments. Our Marketplaces segment provides the infrastructure to enable global online commerce on a variety of platforms, including the eBay.com platform and our other online platforms, such as our online classifieds businesses, our secondary tickets marketplace (StubHub), our online shopping comparison website (Shopping.com) and our apartment listing service platform (Rent.com), as well as our fixed price media marketplace (Half.com). Our Payments segment is comprised of our online payment solutions PayPal and Bill Me Later. Historically, we also had a Communications segment that consisted of Skype Technologies S.A. (Skype). On November19, 2009, we completed the sale of Skype to an investor group for cash, a subordinated note and an equity stake of approximately 30 percent in the outstanding capital stock of the entity that purchased Skype (which is now named Skype). Accordingly, Skypes operating results are not consolidated in our 2010 results. However, Skypes results of operations are consolidated in our 2009 results through the date of sale. Our non-controlling interest in Skype is accounted for under the equity method of accounting. When we refer to we, our, us or eBay in this document, we mean the current Delaware corporation (eBay Inc.) and its California predecessor, as well as all of our consolidated subsidiaries. Use of estimates The preparation of condensed consolidated financial statements in conformity with U.S.generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to provisions for transaction and loan losses, legal contingencies, income taxes, revenue recognition, stock-based compensation and the recoverability of goodwill and intangible assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. Principles of consolidation and basis of presentation The accompanying condensed financial statements are consolidated and include the financial statements of eBay Inc. and our majority-owned subsidiaries.

Net Income Per Share

Net Income Per Share
	3 Months Ended Mar. 31, 2010
Net Income Per Share	Note2 Net Income Per Share Basic net income per share is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and restricted stock is reflected in diluted earnings per share by application of the treasury stock method. The calculation of diluted net income per share excludes all anti-dilutive shares. The following table sets forth the computation of basic and diluted net income per share for the periods indicated: ThreeMonthsEndedMarch31, 2009 2010 (Inthousands,exceptpershareamounts) Numerator: Net income $ 357,113 $ 397,653 Denominator: Weighted average common shares - basic 1,283,810 1,301,248 Dilutive effect of equity incentive plans 4,004 24,773 Weighted average common shares - diluted 1,287,814 1,326,021 Net income per share: Basic $ 0.28 $ 0.31 Diluted $ 0.28 $ 0.30 Common stock equivalents excluded from net income perdiluted share because their effect would have been anti-dilutive 128,097 31,039

Goodwill and Intangible Assets

Goodwill and Intangible Assets
	3 Months Ended Mar. 31, 2010
Goodwill and Intangible Assets	Note3 Goodwill and Intangible Assets Goodwill The following table presents goodwill balances and the adjustments to those balances for each of our reportable segments during the three months ended March31, 2010: December31, 2009 Goodwill Acquired Adjustments March31, 2010 (In thousands) Reportable segments: Marketplaces $ 4,013,906 $ $ (11,390 ) $ 4,002,516 Payments 2,156,541 (1,541 ) 2,155,000 $ 6,170,447 $ $ (12,931 ) $ 6,157,516 Investments accounted for under the equity method of accounting are classified on our balance sheet as long-term investments. Such investments include any related goodwill. As of December31, 2009 and March31, 2010, the goodwill related to our equity investments, included above, was approximately $27.4million. The adjustments to goodwill during the three months ended March31, 2010 were due primarily to foreign currency translation. Intangible Assets The components of identifiable intangible assets are as follows: December31, 2009 March31, 2010 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Useful Life(Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Useful Life(Years) (In thousands, except years) Intangible assets: Customer lists and user base $ 819,653 $ (524,667 ) $ 294,986 6 $ 817,299 $ (550,298 ) $ 267,001 6 Trademarks and trade names 634,387 (300,046 ) 334,341 5 635,179 (321,342 ) 313,837 5 Developed technologies 225,614 (152,982 ) 72,632 3 225,377 (164,196 ) 61,181 3 All other 149,315 (83,462 ) 65,853 4 152,289 (91,155 ) 61,134 4 $ 1,828,969 $ (1,061,157 ) $ 767,812 $ 1,830,144 $ (1,126,991 ) $ 703,153 Aggregate amortization expense for intangible assets was $80.3million and $71.5 million for the three months ended March31, 2009 and 2010, respectively.

Segments

Segments
	3 Months Ended Mar. 31, 2010
Segments	Note4 Segments Operating segments are based upon our internal organization structure, the manner in which our operations are managed, the criteria used by our Chief Operating Decision Maker to evaluate segment performance and the availability of separate financial information. We operate two primary operating segments: Marketplaces and Payments. Historically, we had a Communications segment that consisted of Skype. On November19, 2009, we completed the sale of Skype to an investor group for cash, a subordinated note and an equity stake of approximately 30 percent in the outstanding capital stock of the entity that purchased Skype (which is now named Skype). Accordingly, Skypes operating results are not consolidated in our 2010 results. However, Skypes results of operations are consolidated in our 2009 results through the date of sale. Our non-controlling interest in Skype is accounted for under the equity method of accounting. As such, our proportionate share of the net income (loss) of Skype will be recognized on a one quarter lag as a component of interest and other income, net in our condensed consolidated statement of income. The following tables summarize the financial performance of our operating segments: Three Months Ended March31, 2009 Marketplaces Payments Communications Consolidated (In thousands) Net revenues from external customers $ 1,224,449 $ 642,958 $ 153,179 $ 2,020,586 Direct costs 671,614 530,969 116,915 1,319,498 Direct contribution $ 552,835 $ 111,989 $ 36,264 701,088 Operating expenses and indirect costs of net revenues 278,324 Income from operations 422,764 Interest and other income, net 18,092 Income before income taxes $ 440,856 Three Months Ended March31, 2010 Marketplaces Payments Consolidated (In thousands) Net revenues from external customers $ 1,386,795 $ 809,262 $ 2,196,057 Direct costs 803,964 626,685 1,430,649 Direct contribution $ 582,831 $ 182,577 765,408 Operating expenses and indirect costs of net revenues 276,799 Income from operations 488,609 Interest and other income, net 6,046 Income before income taxes $ 494,655 Direct contribution consists of net revenues from external customers less direct costs. Direct costs include specific costs of net revenues, sales and marketing expenses, and general and administrative expenses, such as advertising and marketing programs, customer support expenses, bank charges, internal interest charges related to Bill Me Later, site operations expenses, product development expenses, billing operations, certain technology and facilities expenses, transaction expenses and provision for transaction and loan losses. Expenses such as our corpo

Fair Value Measurement of Asset

Fair Value Measurement of Assets and Liabilities
	3 Months Ended Mar. 31, 2010
Fair Value Measurement of Assets and Liabilities	Note5 Fair Value Measurement of Assets and Liabilities The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of December31, 2009 and March31, 2010: Description Balance as of December31, 2009 QuotedPricesin ActiveMarketsfor Identical Assets (Level 1) SignificantOther ObservableInputs (Level 2) (In thousands) Assets: Cash and cash equivalents: Bank deposits and money market funds $ 3,999,818 $ 3,999,818 $ Total cash and cash equivalents 3,999,818 3,999,818 Short-term investments: Restricted cash 29,123 29,123 Corporate debt securities 73,140 73,140 Government and agency securities 109,807 109,807 Time deposits 310,418 310,418 Equity instruments 421,498 421,498 Total short-term investments 943,986 450,621 493,365 Derivatives 362 362 Long-term investments: Restricted cash 985 985 Corporate debt securities 457,183 457,183 Government and agency securities 249,360 249,360 Time deposits and other 1,583 1,583 Total long-term investments 709,111 985 708,126 Total financial assets $ 5,653,277 $ 4,451,424 $ 1,201,853 Liabilities: Derivatives $ 5,710 $ $ 5,710 Description Balance as of March31,2010 QuotedPricesin ActiveMarketsfor Identical Assets (Level 1) SignificantOther ObservableInputs (Level 2) (In thousands) Assets: Cash and cash equivalents: Bank deposits and money market funds $ 3,593,003 $ 3,593,003 $ Total cash and cash equivalents 3,593,003 3,593,003 Short-term investments: Restricted cash 31,450 31,450 Corporate debt securities 121,360 121,360 Government and agency securities 113,260 113,260 Time deposits 277,070 277,070 Equity instruments 391,758 391,758 Total short-term investments 934,898 423,208 511,690 Derivatives 27,208 27,208 Long-term investments: Restricted cash 805 805 Corporate debt securities 1,071,541 1,071,541 Government and agency securities 189,370 189,370 Time deposits and other 5,339 5,339 Total long-term investments 1,267,055 805 1,266,250 Total financial assets $ 5,822,164 $ 4,017,016 $ 1,805,148 Liabilities: Derivatives $ 4,914 $ $ 4,914 Our financial assets and liabilities are valued using market

Derivative Instruments

Derivative Instruments
	3 Months Ended Mar. 31, 2010
Derivative Instruments	Note6 Derivative Instruments We have significant international revenues as well as costs denominated in foreign currencies, subjecting us to foreign currency risk. We purchase foreign currency exchange contracts that qualify as cash flow hedges, generally with maturities of 12months or less, to reduce the volatility of cash flows primarily from revenue and intercompany transactions denominated in certain foreign currencies. All outstanding derivatives that qualify for hedge accounting are recognized on the balance sheet at fair value, and changes in their fair value are recorded in accumulated other comprehensive income (loss) until the underlying forecasted transaction occurs. The effective portion of the derivatives gain or loss is initially reported as a component of accumulated other comprehensive income (loss), and is subsequently reclassified into the financial statement line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings. We also hedge our exposure to foreign currency denominated monetary assets and liabilities with foreign currency contracts. Since these derivatives hedge existing exposures that are denominated in foreign currencies, the contracts do not qualify for hedge accounting. Accordingly, these outstanding non-designated derivatives are recognized on the balance sheet at fair value and changes in fair value from these contracts are recorded in interest and other income, net, in the condensed consolidated statement of income. Our derivatives program is not designed or operated for trading or speculative purposes. Our derivative instruments expose us to credit risk to the extent that our counterparties may be unable to meet the terms of the agreements. We seek to mitigate this risk by limiting our counterparties to major financial institutions and by spreading the risk across several major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored on an ongoing basis. Fair Value of Derivative Contracts: The fair value of our outstanding derivative instruments was as follows: DerivativeAssetsReportedin Other Current Assets DerivativeLiabilitiesReportedin Other Current Liabilities December31, 2009 March31, 2010 December31, 2009 March31, 2010 (In thousands) Foreign exchange contracts designated as cash flow hedges $ 27 $ 27,102 $ 4,848 $ 3,800 Foreign exchange contracts not designated as hedging instruments 335 106 862 1,114 Total fair value of derivative instruments $ 362 $ 27,208 $ 5,710 $ 4,914 Effect of Derivative Contracts on Accumulated Other Comprehensive Income: The following table represents the activity of derivative contracts that qualify for hedge accounting as of December31, 2009 and March31, 2010, and the impact of designated derivative contracts on accumulated other comprehensive income for the three months ended March31, 2010: December31,2009 Amountofgain(loss) recognized in other co

Commitments and Contingencies

Commitments and Contingencies
	3 Months Ended Mar. 31, 2010
Commitments and Contingencies	Note7 Commitments and Contingencies Credit Agreement As of March31, 2010, there were no amounts outstanding under our $1.8 billion unsecured revolving credit facility and we were in compliance with the financial covenants in the credit agreement. Litigation and Other Legal Matters In August 2006, Louis Vuitton Malletier and Christian Dior Couture filed two lawsuits in the Paris Court of Commerce against eBay Inc. and eBay International AG. Among other things, the complaint alleged that we violated French tort law by negligently broadcasting listings posted by third parties offering counterfeit items bearing plaintiffs trademarks and by purchasing certain advertising keywords. Around September 2006, Parfums Christian Dior, Kenzo Parfums, Parfums Givenchy, and Guerlain Socit also filed a lawsuit in the Paris Court of Commerce against eBay Inc. and eBay International AG. The complaint alleged that we had interfered with the selective distribution network the plaintiffs established in France and the European Union by allowing third parties to post listings offering genuine perfumes and cosmetics for sale on our websites. In June 2008, the Paris Court of Commerce ruled that eBay and eBay International AG were liable for failing to prevent the sale of counterfeit items on its websites that traded on plaintiffs brand names and for interfering with the plaintiffs selective distribution network. The court awarded plaintiffs approximately EUR 38.6million in damages and issued an injunction (enforceable by daily fines of up to EUR 100,000) prohibiting all sales of perfumes and cosmetics bearing the Dior, Guerlain, Givenchy and Kenzo brands over all worldwide eBay sites to the extent that they are accessible from France. A hearing took place in September 2009 regarding our compliance with the injunction and in November 2009, the court awarded the plaintiffs EUR 1.7million (the equivalent of EUR 2,500per day) and indicated that as a large Internet company we could do a better job of enforcing the injunction. We have taken measures to comply with the injunction and have appealed these rulings. However, these and similar suits may force us to modify our business practices, which could lower our revenue, increase our costs, or make our websites less convenient to our customers. Any such results could materially harm our business. Other luxury brand owners have also filed suit against us or have threatened to do so in numerous different jurisdictions, seeking to hold us liable for, among other things, alleged counterfeit items listed on our websites by third parties, for tester and other not for resale consumer products listed on our websites by third parties, for the alleged misuse of trademarks in listings, for alleged violations of selective distribution channel laws, for alleged violations of parallel import laws, for alleged non-compliance with consumer protection laws or in connection with paid search advertisements. We have prevailed in some of these suits, lost in others, and many are in various stages of appeal. We continue to believe that we have meritorious defenses to these suits and intend to defend ourselves vigorously. In May 2

Stock-Based Plans

Stock-Based Plans
	3 Months Ended Mar. 31, 2010
Stock-Based Plans	Note8 Stock-Based Plans Stock Option Activity The following table summarizes stock option activity for the three-month period ended March31, 2010: Shares (Inthousands) Outstanding at January1, 2010 54,048 Granted 6,480 Exercised (3,049 ) Forfeited/expired/cancelled (2,612 ) Outstanding at March31, 2010 54,867 The weighted average exercise price of stock options granted during the period was $23.90 per share and the related weighted average grant date fair value was $6.69 per share. Restricted Stock Unit Activity The following table summarizes restricted stock unit (RSU) activity for the three-month period ended March31, 2010: Units (Inthousands) Outstanding at January 1, 2010 42,241 Awarded 12,456 Vested (8,962 ) Forfeited (998 ) Outstanding at March 31, 2010 44,737 The weighted average grant date fair value for RSUs awarded during the period was $23.87per share. Nonvested Share Activity There was no material activity related to our nonvested shares for the three-month period ended March31, 2010. Stock-based Compensation Expense The impact on our results of operations of recording stock-based compensation expense for the three months ended March31, 2009 and 2010 was as follows: ThreeMonthsEnded March 31, 2009 2010 (In thousands) Cost of net revenues $ 14,784 $ 13,034 Sales and marketing 33,686 28,491 Product development 30,679 27,164 General and administrative 34,697 33,380 Total stock-based compensation expense $ 113,846 $ 102,069 Capitalized in product development $ 2,295 $ 2,370 Valuation Assumptions We calculated the fair value of each stock option award on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used for the three months ended March31, 2009 and 2010: ThreeMonthsEnded March 31, 2009 2010 Risk-free interest rates 1.6 % 1.5 % Expected lives (in years) 3.8 3.4 Dividend yield 0 % 0 % Expected volatility 47 % 36 % Our computation of expected volatility is based on a combination of historical and market-based implied volatility from traded options on our common stock. Our computation of expected life was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The interest rate for periods within the contractual life of the award is based on the U.S.Treasury yield curve in effect at the time of grant.

Restructuring

Restructuring
	3 Months Ended Mar. 31, 2010
Restructuring	Note9 Restructuring 2009 Customer Service Consolidation In 2009, we began the consolidation of certain customer service facilities in North America and Europe to streamline our operations and deliver better and more efficient customer support to our users. As previously announced, the consolidation will potentially impact approximately 1,100 employees. In connection with this consolidation, we estimate that we will incur aggregate costs of $45.0 million to $55.0 million. During the first quarter of 2010, we incurred restructuring charges of $8.6 million. Since the inception of the plan, we have incurred $35.2 million in restructuring related charges. We expect to complete these activities by mid-2010. The following table summarizes the restructuring and other related costs by segment recognized during the three months ended March31, 2009 and 2010: ThreeMonthsEndedMarch31,2009 ThreeMonthsEndedMarch31,2010 Employee Severanceand Benefits Facilities Total Employee Severanceand Benefits Facilities Total (In thousands) Marketplaces $ 6,615 $ 692 $ 7,307 $ 8,531 $ 38 $ 8,569 Payments (709 ) 13 (696 ) $ 5,906 $ 705 $ 6,611 $ 8,531 $ 38 $ 8,569 The following table summarizes the restructuring activity during the three months ended March31, 2010: EmployeeSeverance and Benefits Facilities Total (In thousands) Accrued liability as of January 1, 2010 $ 8,827 $ 2,082 $ 10,909 Charges 8,531 38 8,569 Payments (2,773 ) (723 ) (3,496 ) Adjustment (252 ) 3 (249 ) Accrued liability as of March 31, 2010 $ 14,333 $ 1,400 $ 15,733 In the table above, adjustments reflect the impact of foreign currency translation.

Income Taxes

Income Taxes
	3 Months Ended Mar. 31, 2010
Income Taxes	Note10 Income Taxes The following table reflects changes in unrecognized tax benefits for the three-month period ended March31, 2010: (Inthousands) Gross amounts of unrecognized tax benefits as of January1, 2010 $ 838,616 Increases related to prior period tax positions 2,378 Decreases related to prior period tax positions (13,804 ) Increases related to current period tax positions 28,681 Settlements (13,073 ) Gross amounts of unrecognized tax benefits as of March31, 2010 $ 842,798 As of December31, 2009 and March31, 2010, our liabilities for unrecognized tax benefits were included in deferred and other tax liabilities, net. The total liabilities for unrecognized tax benefits and the increase in these liabilities in 2010 relate primarily to the allocations of revenue and costs among our global operations partially offset by the impact of tax rulings made during the period affecting our tax positions. Over the next 12 months, our existing tax positions will continue to generate an increase in liabilities for unrecognized tax benefits. We recognize interest and/or penalties related to uncertain tax positions in income tax expense. The amount of interest and penalties accrued as of December31, 2009 and March31, 2010 was approximately $90.5 million and $85.7 million, respectively. We are subject to taxation in the U.S. and various states and foreign jurisdictions. We are under examination by certain tax authorities for the 2003 to 2008 tax years. The material jurisdictions where we are subject to potential examination by tax authorities for tax years after 2002 include, among others, the U.S. (Federal and California), France, Germany, Italy, Korea, Switzerland and Singapore. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations. Although timing of the resolution of these audits are uncertain, we do not believe it is reasonably likely that the total amount of the unrecognized tax benefits as of March31, 2010 will materially change in the next 12 months.

Skype-Related Transaction

Skype-Related Transaction
	3 Months Ended Mar. 31, 2010
Skype-Related Transaction	Note 11 Skype-Related Transaction During the three months ended March31, 2010, Skype paid in full the subordinated note receivable of $125.0 million, which we held as a result of the sale of Skype to an investor group in November 2009, and senior debt securities of $50.0 million. As a result of the payment, we recorded a gain of approximately $22.8 million in interest and other income, net, which had a $13.7 million impact on net income. As of March31, 2010, we reinvested approximately $91.4 million in new senior debt securities issued by Skype, which are reflected in other assets on our condensed consolidated balance sheet. These securities mature in five years and offer a variable interest rate based on LIBOR.