Classmates.com 2008 Annual Report Download - page 25

Table of Contents
expensive or unavailable, our key metrics and financial results could be materially and adversely impacted.
Significant problems with our key systems or those of our third-party vendors could have a material adverse effect on our business,
financial condition, results of operations, and cash flows.
The systems underlying the operations of each of our business segments are complex and diverse, and must efficiently integrate with third-
party systems, such as credit card processors. Key systems include, without limitation, billing; Web site and database management; order
acceptance, fulfillment and processing including the system for transmitting orders through florist members; customer support;
telecommunications network management; advertisement serving and management systems; and internal financial systems. Some of these
systems, such as customer support and FTD's Web site, are outsourced to third-parties, and other systems, such as FTD's florist fulfillment
system, are not redundant. We have experienced systems problems in the past, and we or these third-parties may experience problems in the
future. In addition, if these third-parties face financial or other difficulties, our business could be adversely impacted. Any significant errors,
failures, interruptions, delays, or other problems with our systems or our third-
party vendors or their systems could have a material adverse effect
on our business, financial condition, results of operations, and cash flows.
In addition, our Classmates Media and Communications businesses outsource a majority of their live technical and billing support
functions. These businesses rely on one customer support vendor, and we maintain only a small number of internal customer support personnel
for these businesses. We are not equipped to provide the necessary range of customer support functions in the event that this vendor becomes
unable or unwilling to provide these services to us.
Our failure to protect our proprietary rights could harm our business.
Our trade names, trademarks, service marks, patents, copyrights, domain names, and trade secrets are important to the success of our
business. In particular, we view our primary trademarks as critical to our success. We principally rely upon patent, trademark, copyright, trade
secret, and contract laws to protect our proprietary rights, all of which provide only limited protection. We also license some of our intellectual
property rights, including the Mercury Man logo, to third-parties. The steps we and such third-parties have taken to protect our proprietary rights
may not be adequate, and other third-parties may infringe or misappropriate our proprietary rights. The protection of our proprietary rights may
require the expenditure of significant financial and internal resources. We cannot assure you that we have taken adequate steps to prevent
misappropriation of our proprietary rights. Our failure to adequately protect our proprietary rights could adversely affect our brands and could
harm our business.
We may be unsuccessful at acquiring additional businesses, services or technologies. Even if we complete an acquisition (such as our
recent acquisition of FTD), it may not improve our results of operations and may adversely impact our business and financial condition.
One of our strategic objectives is to acquire businesses, services or technologies that will provide us with an opportunity to diversify the
products and services we offer, leverage our assets and core competencies, or expand our geographic reach, or that otherwise may be
complementary to our existing businesses. We completed the acquisition of FTD in August 2008, and we may acquire additional businesses,
services or technologies in the future. However, acquiring companies is a difficult process with many factors outside of our control. In addition,
our credit agreements impose certain restrictions on our ability to complete acquisitions and there is no assurance that we will be successful in
completing additional acquisitions.
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