Classmates.com 2005 Annual Report Download - page 26

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encountered, and may in the future encounter, software and hardware errors, system design errors and errors in the operation of our systems.
This has resulted in, and may in the future result in, a number of adverse consequences, which have included or may include:
•
users being disconnected from our services or being unable to access our services;
•
loss of data or revenue;
•
injury to reputation; and
•
diversion of development resources.
We have experienced technical and customer support issues associated with our services and software releases. These issues have resulted
in users discontinuing their service and have adversely impacted our revenues. A number of our material technologies and systems are based on
different platforms. To the extent we attempt to integrate these technologies and systems, we may experience a number of difficulties, errors,
failures and unanticipated costs. In addition, our business relies on third-party software including, without limitation, software licensed from
Oracle for our internal operations, software licensed from Portal and Remedy for billing and customer support, software licensed from
SlipStream Data Inc. for our accelerated services, software licensed from certain third parties for our VoIP services, and software licensed from
certain third parties for our advertising products and services. Any significant failure of this software could materially and adversely affect our
business, financial position, results of operations and cash flows. Our services also rely on their compatibility with other third-party systems,
particularly operating systems. Incompatibility with future changes to third-party software upon which our systems rely could materially affect
our ability to deliver our services. We cannot assure you that we will not experience significant technical problems with our services in the
future.
Our recently launched VoIP services are dependent upon internally developed software, licensed software and third party
telecommunications services, all of which are relatively new. Our VoIP services have not yet been operated on a significant scale. There will be
bugs and other issues associated with these services. If we experience any material difficulties operating these services on a significant scale, or
if the bugs or other issues we encounter with these services are material, our ability to obtain and maintain users will be adversely impacted.
A security breach or inappropriate use of our network or services could expose us to claims or a loss of revenue.
The success of our business depends on the security of our networks and, in part, on the security of the network infrastructures of our third-
party telecommunications service providers, providers of customer support services and other vendors. Unauthorized or inappropriate access to,
or use of, our networks, computer systems and services could potentially jeopardize the security of confidential information, including credit
card information, of our users and of third parties. Third parties have in the past used our networks, services and brand names to perpetrate
crimes, such as identity theft or credit card theft, and may do so in the future. Users or third parties may assert claims of liability against us as a
result of any failure by us to prevent security breaches, unauthorized disclosure of user information or other such activities. Although we use
security measures that we believe to be industry standard, we cannot assure you that the measures we take will be successfully implemented or
will be effective in preventing these types of activities. We also cannot assure you that the security measures of our third-party network
providers, providers of customer and billing support services or other vendors will be adequate. In addition to potential legal liability, these
activities may adversely impact our reputation or our revenues and may interfere with our ability to provide our services, all of which could
adversely impact our business.
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