Salesforce.com 2006 Annual Report Download - page 25

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Table of Contents
willingness of enterprises, large and small, to purchase and deploy these applications. If third-party technology providers or enterprises do not perceive the
benefits of our on-line application marketplace, then the market for this initiative may not develop at all, or it may develop more slowly than we expect, either
of which would affect our ability to generate revenue. Given this new and unproven market, we have limited insight into trends that may develop and affect
this initiative. In addition, our customers may authorize such third-party technology providers to access their customer data. Because we do not control the
transmissions between our customers and third-party technology providers or the processing of such data by third-party technology providers, we cannot
ensure the complete integrity or security of such transmissions or processing. Further, despite contract provisions designed to protect us, customers may look
to us to support and warrant the third-party applications, which may expose us to potential claims, liabilities and obligations for applications we did not
develop or sell. Moreover, the AppExchange directory, and other efforts to expand our service beyond the CRM market, may divert management resources
from existing operations and require us to commit significant financial resources to an unproven business, which may harm our business.
As we acquire companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value and
adversely affect our operating results and the value of our common stock.
As part of our business strategy, we may acquire, enter into joint ventures with or make investments in complementary companies, services and
technologies in the future. Acquisitions and investments involve numerous risks, including:
• difficulties in integrating operations, technologies, services and personnel;
• diversion of financial and managerial resources from existing operations;
• risk of entering new markets in which we have little to no experience;
• potential write-offs of acquired assets or investments;
• potential loss of key employees;
• inability to generate sufficient revenue to offset acquisition or investment costs;
• negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed
assets and deferred compensation, and the loss of acquired deferred revenue;
• delays in customer purchases due to uncertainty and the inability to maintain relationships with customers of the acquired businesses; and
• the need to implement controls, procedures and policies appropriate for a public company at companies that prior to the acquisition lacked such
controls, procedures and policies.
In addition, if we finance acquisitions by issuing debt or equity securities, our existing stockholders may be diluted which could affect the market price
of our stock. Further, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be seriously harmed and the
value of our common stock may decline.
If we fail to develop our brand cost-effectively, our business may suffer.
We believe that developing and maintaining awareness of the salesforce.com brand in a cost-effective manner is critical to achieving widespread
acceptance of our existing and future services and is an important element in attracting new customers. Furthermore, we believe that the importance of brand
recognition will increase as competition in our market develops. Successful promotion of our brand will depend largely on the effectiveness of our marketing
efforts and on our ability to provide reliable and useful services at competitive
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