Earthlink 2015 Annual Report Download - page 25

Table of Contents
Both the costs of defending lawsuits and any settlements or judgments against us could adversely affect our results of operations and cash flows.
We may not be able to protect our intellectual property.
We regard our trademarks, including EarthLink, EarthLink Business and EarthLink Carrier, as valuable assets to our business. In particular, we believe the strength
of these brands among existing and potential customers is important to the success of our business. Additionally, our EarthLink, EarthLink Business and EarthLink
Carrier service marks, proprietary technologies, domain names and similar intellectual property are also important to the success of our business. We principally
rely upon trademark law as well as contractual restrictions to establish and protect our technology and proprietary rights and information. We require employees
and consultants and, when possible, suppliers and distributors to sign confidentiality agreements, and we generally control access to, and distribution of, our
technologies, documentation and other proprietary information. The efforts we have taken to protect our proprietary rights may not be sufficient or effective. Third
parties may infringe or misappropriate our trademarks and similar proprietary rights. If we are unable to protect our proprietary rights from unauthorized use, our
brand image may be harmed and our business may suffer. In addition, protecting our intellectual property and other proprietary rights is expensive and time
consuming. Any increase in the unauthorized use of our intellectual property could adversely affect our results of operations and cash flows.
We may be unable to hire and retain sufficient qualified personnel, and the loss of any of our key executive officers could adversely affect us.
Our business depends on our ability to hire and retain key executive officers, senior management, sales, IT and other key personnel, many of whom have
significant experience in our industry and whose expertise is required to successfully transition our business into a leading managed network, security and cloud
services provider. There is substantial and continuous competition for highly skilled personnel. Workforce reductions, changes in our business strategy and
acquisitions may affect our ability to retain or replace key personnel, harm employee morale and productivity or disrupt our business. Key employees may depart
because of issues relating to uncertainty or a desire not to remain with us following a workforce reduction, change in business strategy or acquisition. Effective
succession planning is important to our long-term success. Failure to ensure effective transfer of knowledge and transitions involving key employees could hinder
execution of our business strategies. Finally, the loss of any of our key executives could impair our ability to execute our business strategy or otherwise have a
material adverse effect on us.
Unfavorable general economic conditions could harm our business.
Unfavorable general economic conditions, including recession and disruptions to the credit and financial markets, could negatively affect our business. These
conditions could adversely affect the affordability of, and customer demand for, some of our products and services and could cause customers to delay or forego
purchases of our products and services. Many of our existing customers are small and medium-sized businesses, and a significant number of our customers are in
the retail industry. We believe these businesses are likely to be affected by economic downturns. Unfavorable general economic conditions could cause business
customers to reduce technology spending, which could negatively impact sales of our growth services. In addition, our business customers may not be able to
obtain adequate access to credit, which could affect their ability to make timely payments to us. One or more of these circumstances could cause our revenues to
decline, churn to increase, allowance for doubtful accounts and write-offs of accounts receivable to increase or otherwise adversely affect our business, results of
operations and cash flows.
Unfavorable general economic conditions could also negatively impact third-party vendors we rely on for services and network equipment integral to our business.
If these vendors encounter financial difficulties, their ability to supply services and network equipment to us may be curtailed. If such vendors were to fail, we may
not be able to replace them without disruption to, or deterioration of, our service and we may incur higher costs associated with new vendors. If we were required
to purchase another manufacturer's equipment, we could incur significant initial costs to integrate the equipment into our network and to train personnel to use the
new equipment. Any interruption in the services provided by our third-party vendors could adversely affect our business, results of operations and cash flows.
Government regulations could adversely affect our business or force us to change our business practices.
Our services are subject to varying degrees of federal, state and local regulation. Federal, state and local regulations governing our services are the subject of
ongoing judicial proceedings, rulemakings and legislative initiatives that could change the manner in which our industry operates and affect our business. Changes
in regulations or in governing legislation, such as the Telecommunications Act of 1996, could have a significant effect on our business, particularly if the change
impairs our ability to interconnect with incumbent carrier networks, lease portions of other carriers' networks or resell their services at reasonable prices, or lease
elements of networks of the ILECs under acceptable rates, terms and conditions. We cannot predict the outcome of any
22