beatandraise : Equity Research with AI and ChatGPT on SEC Edgar

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<div> Note 3 — Commitments and Contingencies Commitments We have entered into non-cancellable operating and capital leases for fixed assets and office, fulfillment, and data center facilities. Rental expense under operating lease agreements was $48 million and $41 million for Q1 2010 and Q1 2009. In December 2007, we entered into a series of leases and other agreements for the lease of corporate office space to be developed in Seattle, Washington, with initial terms of up to 16 years commencing on completion of development between 2010 and 2013, with options to extend for two five-year periods. Related to these leases, we expect to occupy approximately 1.7 million square feet of office space. We also have an option to lease up to an additional approximately 500,000 square feet at rates based on fair market values at the time the option is exercised, subject to certain conditions. In addition, if interest rates exceed a certain threshold, we have the option to provide financing for one of the buildings.   The following summarizes our principal contractual commitments, excluding open orders for inventory purchases that support normal operations, as of March 31, 2010:   <table cellspacing="0" cellpadding="0" width="100%" align="center" border="0"> <tr> <td width="49%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2" rowspan="2">Nine Months Ended December 31, 2010</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="11">Year Ended December 31,</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2" rowspan="2">Thereafter</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2" rowspan="2">Total</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">2011</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">2012</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">2013</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">2014</td> <td valign="bottom">  </td> <td valign="bottom">  </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" align="center" colspan="20">(in millions)</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Operating and capital commitments: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Debt principal and interest </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">42</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">52</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">59</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">58</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">211</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Capital leases, including interest </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">110</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">114</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">63</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">13</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">5</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">305</td> </tr> <tr> <td valign="top"> Operating leases </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">134</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">169</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">157</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">149</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">144</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">283</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,036</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Other commitments (1)(2) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">175</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">105</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">91</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">87</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">86</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,157</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,701</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Total commitments </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">461</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">440</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">370</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">307</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">235</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,440</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,253</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" align="left" width="4%">(1)</td> <td valign="top" align="left">Includes the estimated timing and amounts of payments for rent, operating expenses, and tenant improvements associated with approximately 1.7 million square feet of corporate office space being developed in Seattle, Washington. The amount of space available and our financial and other obligations under the lease agreements are affected by various factors, including government approvals and permits, interest rates, development costs, and other expenses and our exercise of certain rights under the lease agreements.</td> </tr> </table> <table style="BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" align="left" width="4%">(2)</td> <td valign="top" align="left">Excludes $184 million of tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.</td> </tr> </table> Pledged Securities We have pledged or otherwise restricted a portion of our cash and marketable securities as collateral for standby and trade letters of credit, guarantees, debt and real estate leases. We classify cash and marketable securities with use restrictions of twelve months or longer as non-current “Other assets” on our consolidated balance sheets. The amount required to be pledged for certain real estate lease agreements changes over the life of our leases based on our credit rating and changes in our market capitalization. Information about collateral required to be pledged under these agreements is as follows:   <table cellspacing="0" cellpadding="0" width="100%" align="center" border="0"> <tr> <td width="62%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Standby and Trade Letters of Credit and Guarantees</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Debt (1)</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Real Estate Leases (2)</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Total</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" align="center" colspan="13">(in millions)</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Balance at December 31, 2009 </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">142</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">157</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">303</td> </tr> <tr> <td valign="top"> Net change in collateral pledged </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(4</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">17</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(1</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">12</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Balance at March 31, 2010 </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">138</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">174</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">315</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" align="left" width="4%">(1)</td> <td valign="top" align="left">Represents collateral for certain debt related to our international operations.</td> </tr> </table> <table style="BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" align="left" width="4%">(2)</td> <td valign="top" align="left">At March 31, 2010, our market capitalization was $61 billion. The required amount of collateral to be pledged will increase by $1.5 million if our market capitalization is equal to or below $40 billion, an additional $5 million if our market capitalization is equal to or below $18 billion, and an additional $6 million if our market capitalization is equal to or below $13 billion.</td> </tr> </table> Legal Proceedings The Company is involved from time to time in claims, proceedings and litigation, including the matters described in Item 8 of Part II, “Financial Statements and Supplementary Data — Note 7, Commitments and Contingencies — Legal Proceedings” of our 2009 Annual Report on Form 10-K, as supplemented by the following: In December 2005, Registrar Systems LLC filed a complaint against us and Target Corporation for patent infringement in the United States District Court for the District of Colorado. The complaint alleges that our website technology, including the method by which Amazon.com enables customers to use Amazon.com account information on websites that Amazon.com operates for third parties, such as Target.com, infringes two patents obtained by Registrar Systems purporting to cover methods and apparatuses for a “World Wide Web Registration Information Processing System” (U.S. Patent Nos. 5,790,785 and 6,823,327) and seeks injunctive relief, monetary damages in an amount no less than a reasonable royalty, prejudgment interest, costs, and attorneys’ fees. In September 2006, the Court entered an order staying the lawsuit pending the outcome of the Patent and Trademark Office’s re-examination of the patents in suit. In late 2009, the Patent and Trademark Office concluded its re-examination and cancelled the patents in suit. Accordingly, the plaintiff voluntarily dismissed this lawsuit without prejudice in March 2010. In August 2006, Cordance Corporation filed a complaint against us for patent infringement in the United States District Court for the District of Delaware. The complaint alleges that our website technology, including our 1-Click ordering system, infringes a patent obtained by Cordance purporting to cover an “Object-Based Online Transaction Infrastructure” (U.S. Patent No. 6,757,710) and seeks injunctive relief, monetary damages in an amount no less than a reasonable royalty, treble damages for alleged willful infringement, prejudgment interest, costs, and attorneys’ fees. In response, we asserted a declaratory judgment counterclaim in the same action alleging that a service that Cordance has advertised its intent to launch infringes a patent owned by us entitled “Networked Personal Contact Manager” (U.S. Patent No. 6,269,369). In August 2009, a jury trial was held and the jury found that all asserted claims of the ‘710 patent were not infringed by Amazon or were invalid. In February 2010, the Court partially reversed the jury’s findings, ruling that some of the asserted claims of the ‘710 Patent were valid and were infringed by Amazon. We plan to appeal the Court’s ruling. In March 2009, the Tobin Family Education and Health Foundation filed a complaint against us for patent infringement in the United States District Court for the Middle District of Florida. The complaint alleges, among other things, that the technology underlying the Amazon Associates program infringes a patent owned by Tobin purporting to cover a “Method and System for Customizing Marketing Services on Networks Communication with Hypertext Tagging Conventions” (U.S. Patent No. 7,505,913) and seeks injunctive relief, monetary damages, costs and attorneys fees. In March 2010, we settled this litigation on terms that include a nonexclusive license to the patent in suit and, accordingly, the lawsuit has been dismissed with prejudice. In April 2009, Parallel Networks, LLC filed a complaint against us for patent infringement in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that our website technology infringes a patent owned by Parallel Networks purporting to cover a “Method And Apparatus For Client-Server Communication Using a Limited Capability Client Over A Low-Speed Communications Link” (U.S. Patent No. 6,446,111) and seeks injunctive relief, monetary damages, costs and attorneys fees. The complaint was dismissed without prejudice in February 2010, but the plaintiff filed a new complaint against us the following month containing similar allegations. We dispute the allegations of wrongdoing and intend to vigorously defend ourselves in this matter. In June 2009, Bedrock Computer Technologies LLC filed a complaint against us for patent infringement in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that our website technology infringes a patent owned by Bedrock purporting to cover a “Method And Apparatus For Information Storage and Retrieval Using a Hashing Technique with External Chaining and On-the-Fly Removal of Expired Data” (U.S. Patent Nos. 5,893,120) and seeks injunctive relief, monetary damages, enhanced damages, a compulsory future royalty, costs and attorneys fees. The complaint was dismissed without prejudice in March 2010, but the plaintiff filed a new complaint against us the following month containing similar allegations. We dispute the allegations of wrongdoing and intend to vigorously defend ourselves in this matter. In February 2010, Texas OCR Technologies LLC filed a complaint against us for patent infringement in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that our Search Inside the Book feature infringes a patent owned by Texas OCR Technologies purporting to cover a “Methodology for Displaying Search Results Using Character Recognition” (U.S. Patent No. 6,363,179) and seeks monetary damages, costs and attorneys fees. We dispute the allegations of wrongdoing and intend to vigorously defend ourselves in this matter.   Depending on the amount and the timing, an unfavorable resolution of some or all of the claims, proceedings and litigation in which the Company is involved could materially affect our business, results of operations, financial position, or cash flows. See also “Note 6 — Income Taxes.” </div>

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<div> Note 6 — Income Taxes Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes we make a cumulative adjustment. The 2010 annual effective tax rate is estimated to be lower than the 35% U.S. federal statutory rate primarily due to anticipated earnings of our subsidiaries in jurisdictions where our effective tax rate is lower than in the U.S. Cash paid for income taxes was $4 million and $11 million in Q1 2010 and Q1 2009.   As of March 31, 2010, and December 31, 2009, tax contingencies (gross unrecognized tax benefits) were $184 million and $181 million. Due to the nature of our business operations, we expect the total amount of tax contingences for prior period tax positions will grow over the next 12 months in comparable amounts to the prior 12 months. We do not believe it is reasonably possible that the total amount of tax contingencies will significantly decrease within the next 12 months. We are under examination, or may be subject to examination, by the Internal Revenue Service (“IRS”) for calendar years 2005 through 2009. Additionally, any net operating losses that were generated in prior years and utilized in 2005 through 2009 may also be subject to examination by the IRS. We are under examination, or may be subject to examination, in the following major jurisdictions for the years specified: Kentucky for 2005 through 2009, France for 2007 through 2009, Germany for 2003 through 2009, Luxembourg for 2005 through 2009, and the United Kingdom for 2004 through 2009. In addition, in 2007, Japanese tax authorities assessed income tax, including penalties and interest, of approximately $120 million against one of our U.S. subsidiaries for the years 2003 through 2005. We believe that these claims are without merit and are disputing the assessment. Further proceedings on the assessment have been stayed during negotiations between U.S. and Japanese authorities over the double taxation issues the assessment raises, and we have provided bank guarantees to suspend enforcement of the assessment. We also may be subject to income tax examination by Japanese tax authorities for 2006 through 2009. </div>

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<div> Note 2 — Cash, Cash Equivalents, and Marketable Securities As of March 31, 2010, and December 31, 2009, our cash, cash equivalents, and marketable securities primarily consisted of cash, government and government agency securities, AAA-rated money market funds, and other investment grade securities. Our marketable fixed-income securities have maturities of less than 5 years. Cash equivalents and marketable securities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. We measure the fair value of money market funds and equity securities based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. We did not hold any securities categorized as Level 3 as of March 31, 2010, or December 31, 2009.   The following table summarizes, by major security type, our cash, cash equivalents, and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):   <table cellspacing="0" cellpadding="0" width="100%" align="center" border="0"> <tr> <td width="54%"></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="6%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="12">March 31, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">December 31, 2009</td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Cost or Amortized Cost</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Gross Unrealized Gains</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Gross Unrealized Losses</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Total Estimated Fair Value</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Total Estimated Fair Value</td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Cash </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">412</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">412</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">391</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Level 1 securities: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Money market funds </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,262</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,262</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,750</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Equity securities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Level 2 securities: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Foreign government and agency securities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,537</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">10</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,547</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,999</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> U.S. government and agency securities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,894</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">5</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,897</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,268</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Corporate debt securities (1) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">209</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">5</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">214</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">211</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Asset-backed securities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">39</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">41</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">46</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Other fixed income securities </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">7</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">7</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"></td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,361</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">22</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">5,381</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">6,672</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Less: Long-term marketable securities (2) </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(318</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(306</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Total cash, cash equivalents, and marketable securities </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,063</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,366</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" align="left" width="4%">(1)</td> <td valign="top" align="left">Corporate debt securities include investments in financial, insurance, and corporate institutions. No single issuer represents a significant portion of the total corporate debt securities portfolio.</td> </tr> </table> <table style="BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" align="left" width="4%">(2)</td> <td valign="top" align="left">We are required to pledge or otherwise restrict a portion of our marketable securities as collateral for standby letters of credit, guarantees, debt and real estate lease agreements. We classify cash and marketable securities with use restrictions of twelve months or longer as non-current “Other assets” on our consolidated balance sheets. See “Note 3 — Commitments and Contingencies.”</td> </tr> </table> </div>

97000000

-2732000000

2780000000

1024000000

43000000

4755000000

458000000

124000000

2524000000

168000000

<div> Note 7 — Segment Information We have organized our operations into two principal segments: North America and International. We present our segment information along the same lines that our chief executive reviews our operating results in assessing performance and allocating resources. We allocate operating expenses to segment results, excluding the line item “Other operating expense (income), net” and operating expenses attributable to stock-based compensation. A significant majority of our costs for “Technology and content” are incurred in the United States and most of these costs are allocated to our North America segment. There are no internal revenue transactions between our reporting segments.   Information on reportable segments and reconciliation to consolidated net income was as follows:   <table cellspacing="0" cellpadding="0" width="100%" align="center" border="0"> <tr> <td width="84%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="6">Three Months Ended March 31,</td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">    2010    </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">    2009    </td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom" align="center" colspan="6">(in millions)</td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> North America </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Net sales </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,780</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,578</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Operating expenses </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Cost of sales </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,761</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,884</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Direct segment operating expenses (1) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">746</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">544</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr> <td valign="top"> Segment operating income </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">273</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">150</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> International </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Net sales </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3,351</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,311</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Operating expenses </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Cost of sales </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,740</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,857</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Direct segment operating expenses (1) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">377</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">282</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr> <td valign="top"> Segment operating income </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">234</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">172</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Consolidated </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Net sales </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,131</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,889</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Operating expenses </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"> </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Cost of sales </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">5,501</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,741</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Direct segment operating expenses (1) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,123</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">826</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr> <td valign="top"> Segment operating income </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">507</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">322</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Stock-based compensation </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(87</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(67</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td valign="top"> Other operating income (expense), net </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(26</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(11</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Income from operations </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">394</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">244</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td valign="top"> Total non-operating income (expense) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">7</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Provision for income taxes </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(100</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(69</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr> <td valign="top"> Equity-method investment activity, net of tax </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">) </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Net income </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">299</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">177</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" align="left" width="4%">(1)</td> <td valign="top" align="left">Represents the fulfillment, marketing, technology and content, and general and administrative operating expenses, excluding stock-based compensation, that are allocated to segments.</td> </tr> </table> </div>

360000000

<div> Note 1 — Accounting Policies Unaudited Interim Financial Information We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2010 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2009 Annual Report on Form 10-K. Prior Period Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. We no longer present gross profit in our consolidated statement of operations as we believe income from operations is a more meaningful measure due to the diversity of our product categories and services. Principles of Consolidation The consolidated financial statements include the accounts of Amazon.com, Inc., its wholly-owned subsidiaries, and those entities in which we have a variable interest and are the primary beneficiary (collectively, the “Company”). Intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities. Estimates are used for, but not limited to, valuation of inventory, sales returns, income taxes, stock-based compensation, valuation of acquired intangibles and goodwill, determining the selling price of deliverables in multiple element revenue arrangements, contingencies, valuation of investments, collectability of receivables, incentive discount offers, and depreciable lives of fixed assets and internally-developed software. Actual results could differ materially from those estimates. Recent Accounting Pronouncements In June 2009, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on the consolidation of variable interest entities. The new guidance requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (“VIE”), and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. We adopted this guidance on January 1, 2010. Adoption did not have a material impact on our consolidated financial statements. On January 1, 2010, we prospectively adopted ASU 2009-13, which amends ASC Topic 605, Revenue Recognition. Under this standard, we allocate revenue in arrangements with multiple deliverables using estimated selling prices if we do not have vendor-specific objective evidence or third-party evidence of the selling prices of the deliverables. Estimated selling prices are management’s best estimates of the prices that we would charge our customers if we were to sell the standalone elements separately.   Sales of our Kindle e-reader are considered arrangements with multiple deliverables, consisting of the device, wireless access and delivery, and software upgrades. Under the prior accounting standard, we accounted for sales of the Kindle ratably over the estimated life of the device. Accordingly, revenue and associated product cost of the device through December 31, 2009, were deferred at the time of sale and recognized on a straight-line basis over the two year estimated economic life. As of January 2010, we account for the sale of the Kindle as three deliverables. The revenue related to the device, which is the substantial portion of the total sale price, and related costs are recognized upon delivery. Revenue related to wireless access and delivery and software upgrades is amortized over the life of the device, which remains estimated at two years. Because we have adopted ASU 2009-13 prospectively, we are recognizing $508 million throughout 2010 and 2011 for revenue previously deferred under the prior accounting standard. </div>

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17000000 5000000 6000000 546000000 366000000 -227000000 188000000 47000000 18000000 0001018724 2010-01-01 2010-03-31 0001018724 2009-01-01 2009-03-31 0001018724 2009-01-01 2009-12-31 0001018724 2009-04-01 2010-03-31 0001018724 2008-04-01 2009-03-31 0001018724 2009-12-31 0001018724 2008-12-31 0001018724 2010-03-31 0001018724 2009-03-31 0001018724 2010-04-16 0001018724 2008-03-31 iso4217:USD shares iso4217:USD shares Includes stock-based compensation as follows: Fulfillment $ 18 $ 15 Marketing 5 4 Technology and content 47 36 General and administrative 17 12