Classmates.com 2005 Annual Report Download - page 20

may affect our long-term performance. As a result, you should not rely on period-to-period comparisons as an indication of future or long-term
performance. In addition, these factors create difficulties with respect to our ability to forecast our financial performance and account metrics
accurately. We believe that these difficulties in forecasting present even greater challenges for financial analysts who publish their own estimates
of our future financial results and account metrics. We cannot assure you that we will achieve the expectations or financial projections made by
our management or by the financial analysts. In the event we do not achieve such expectations or projections, the price of our common stock
could be adversely affected.
If we cannot identify and complete acquisitions, we may not be able to grow and achieve our strategic objectives.
One of our strategic objectives is to acquire businesses, product lines or technologies which will provide us with an opportunity to leverage
our assets and core competencies, or which otherwise will be complementary to our existing businesses. It is likely that we will not succeed in
growing our revenues unless we are able to successfully complete acquisitions. The merger and acquisition market for companies offering
Internet services is extremely competitive, particularly for companies who have demonstrated a profitable business model with long-
term growth
potential. Recently, the public equity markets have been very receptive to companies with these characteristics. As a result, in many cases,
companies with these characteristics trade publicly or are privately valued at multiples of earnings, revenues, operating income and other metrics
significantly higher than the multiples at which we are currently valued. Acquisitions may require us to obtain additional debt or equity
financing, which may not be available to us on reasonable terms, or at all. These and other factors may make it difficult for us to acquire
additional businesses, product lines or technologies at affordable prices, or at all, and there is no assurance that we will be successful in
completing additional acquisitions.
We cannot assure you that we will be able to successfully manage, integrate or grow our Web-hosting, photo-sharing and Classmates
businesses.
In April 2004, we acquired the assets of About, Inc.’s Web-hosting business, in November 2004, we acquired Classmates and in
March 2005, we acquired the assets of Homestead Technologies, Inc.’s online digital photo-
sharing business. We do not have prior experience in
any of these lines of business and may not be able to compete successfully in them. To the extent we attempt to integrate various aspects of these
businesses, we may not be successful. There may be unanticipated risks, liabilities and costs associated with these businesses, and we cannot
assure you that these businesses will have a positive impact on our results of operations. In addition, we cannot assure you that we will be
successful in maintaining or growing their pay or free accounts.
Even if we are successful at acquiring additional businesses, product lines or technologies, acquisitions may not improve our results of
operations and may adversely impact our business and financial condition.
We have evaluated, and expect to continue to evaluate, a wide variety of potential strategic transactions that we believe may complement
our current or future business activities. We routinely engage in discussions regarding potential acquisitions and any of these transactions could
be material to our financial condition and results of operations. However, we cannot assure you that the anticipated benefits of an acquisition will
materialize. Acquiring a business, product line or technology involves many risks, including:
• disruption of our ongoing business and diversion of resources and management time;
•
unforeseen obligations or liabilities;
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