Computer Associates 2009 Annual Report Download - page 25

Our sales to government clients subject us to risks, including early termination, audits, investigations, sanctions and
penalties.
Approximately 10% of our total revenue backlog as of March 31, 2009 is associated with multi-year contracts signed
with the U.S. federal government and other U.S. state and local governmental agencies. These contracts are generally
subject to annual fiscal funding approval, may be terminated at the convenience of the government, or both. Termination
of a contract or funding for a contract could adversely affect our sales, revenue and reputation. Additionally, government
contracts are generally subject to audits and investigations, which could result in various civil and criminal penalties and
administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits,
suspension of payments, fines and suspensions or debarment from doing business with the government.
Our customers’ data centers and IT environments may be subject to hacking or other breaches, harming the market
perception of the effectiveness of our products.
If an actual or perceived breach of our customers’ network security occurs, allowing access to our customers’ data
centers or other parts of their IT environments, regardless of whether the breach is attributable to our products, the
market perception of the effectiveness of our products could be harmed. Because the techniques used by computer
hackers to access or sabotage networks change frequently and may not be recognized until launched against a target,
we may be unable to anticipate these techniques. Alleviating any of these problems could require significant
expenditures of our capital and diversion of our resources from development efforts. Additionally, these efforts could
cause interruptions, delays or cessation of our product licensing, or modification of our software, which could cause us
to lose existing or potential customers, which could materially adversely affect our business, financial condition,
operating results and cash flow.
Our software products, data centers and IT environments may be subject to hacking or other breaches, harming the
market perception of the effectiveness of our products.
We expect to be an ongoing target of attacks specifically designed to impede the performance of our products. Similarly,
experienced computer programmers, or hackers, may attempt to penetrate our network security or the security of our
data centers and IT environments and misappropriate proprietary information or cause interruptions of our services.
Although we believe we have sufficient controls in place to prevent significant external disruptions, if these intentionally
disruptive efforts are successful, our activities could be adversely affected, our reputation and future sales could be
harmed and our business, financial condition, operating results and cash flow could be materially adversely affected.
The use of third-party microcode could negatively affect our product development.
We anticipate ongoing use of microcode or firmware provided by hardware manufacturers. Microcode and firmware are
essentially software programs embedded in hardware and are, therefore, less flexible than other types of software. We
believe that such continued use will not have a significant impact on our operations and that our products will remain
compatible with any changes to such code. However, future technological developments involving such microcode could
have a material adverse effect on our business, financial condition, operating results and cash flow.
We may lose access to third-party operating systems, which could materially adversely affect future product
development.
In the past, certain of our licensees using proprietary operating systems were furnished with “source code,” which makes
the operating system understandable to programmers; or “object code,” which directly controls the hardware; and other
technical documentation. Since the availability of source code facilitated the development of systems and applications
software, which must interface with the operating systems, independent software vendors, such as us, were able to
develop and market compatible software. Other vendors, including some of the largest vendors, have a policy of
restricting the use or availability of the source code for some of their operating systems. To date, this policy has not had
a material effect on us. Some companies, however, may adopt more restrictive policies in the future or impose
unfavorable terms and conditions for such access. These restrictions may, in the future, result in higher research and
development costs for us in connection with the enhancement and modification of our existing products and the
development of new products. There can be no assurance that such restrictions will not have a material adverse effect
on our business, financial condition, operating results and cash flow.
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