Shutterfly 2009 Annual Report Download - page 33

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If we are unable to develop, market and sell new products and services that address additional market opportunities, our results of operations
may suffer. In addition, we may need to expand beyond our current customer demographic to grow our business.
Although historically we have focused our business on consumer markets for silver halide prints, such as 4×6 prints, and photo-
based
products, such as photo books and calendars, we intend to address, and demand may shift to, new products and services. In addition, we believe
we may need to address additional markets and expand our customer demographic in order to further grow our business. We may not
successfully expand our existing services or create new products and services, address new market segments or develop a significantly broader
customer base. Any failure to address additional market opportunities could result in loss of market share, which would harm our business,
financial condition and results of operations.
We may undertake acquisitions to expand our business, which may pose risks to our business and dilute the ownership of our existing
stockholders.
A key component of our business strategy includes strengthening our competitive position and refining the customer experience on our
website through internal development. However, from time to time, we may selectively pursue acquisitions of businesses, like our June 2007
acquisition of Make it About Me! (“MIAM”),
our January 2008 acquisition of Nexo and other technologies or services. Integrating any newly
acquired businesses, technologies or services is likely to be expensive and time consuming. To finance any acquisition, it may be necessary for
us to raise additional funds through public or private financings. Additional funds may not be available on terms that are favorable to us, and, in
the case of equity financings, would result in dilution to our stockholders. Also, the value of our stock may be insufficient to attract acquisition
candidates. If we do complete any acquisitions, we may be unable to operate the acquired businesses profitably or otherwise implement our
strategy successfully. If we are unable to integrate any newly acquired entities, technologies or services effectively, our business and results of
operations will suffer.
The time and expense associated with finding suitable and compatible businesses, technologies or services could also
disrupt our ongoing business and divert our management’s attention. Future acquisitions by us could also result in large and immediate write-
offs
or assumptions of debt and contingent liabilities, any of which could substantially harm our business and results of operations.
Our net revenues and results of operations are affected by the level of vacation and other travel by our customers, and any declines or
disruptions in the travel industry could harm our business.
Because vacation and other travel is one of the primary occasions in which our customers utilize their digital cameras, our net revenues and
results of operations are affected by the level of vacation and other travel by our customers. Accordingly, downturns or weaknesses in the travel
industry could harm our business. Travel expenditures are sensitive to business and personal discretionary spending levels and tend to decline
during general economic downturns such as those currently being experienced in the U.S. and worldwide. Events or weakness in the travel
industry that could negatively affect the travel industry include price escalation in the airline industry or other travel-
related industries, airline or
other travel related strikes, safety concerns, including terrorist activities, inclement weather and airline bankruptcies or liquidations. In addition,
high gasoline prices may lead to reduced travel in the United States. Any decrease in vacation or travel could harm our net revenues and results
of operations.
Failure to adequately protect our intellectual property could substantially harm our business and results of operations.
We rely on a combination of patent, trademark, trade secret and copyright law and contractual restrictions to protect our intellectual
property. These protective measures afford only limited protection. Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our website features and functionalities or to obtain and use information that we consider proprietary, such as the
technology used to operate our website, our production operations and our trademarks.
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