Stamps.com 2011 Annual Report Download - page 17

System and online security failures could harm our business and operating results. We may experience disruptions when we move our
corporate headquarters later in 2012.
Our services depend on the efficient and uninterrupted operation of our computer and communications hardware systems. In addition, we must
provide a high level of security for the transactions we execute. We rely on internally-developed and third-
party technology to provide secure
transmission of postage and other confidential information. Any breach of these security measures would severely impact our business and
reputation and would likely result in the loss of customers and revenues. Furthermore, if we fail to provide adequate security, the USPS could
prohibit us from selling postage over the Internet.
Our systems and operations are vulnerable to damage or interruption from a number of sources, including fire, flood, power loss,
telecommunications failure, break-
ins, earthquakes and similar events. Our Internet host provider does not guarantee that our Internet access will
be uninterrupted, error-free or secure. Our servers are also vulnerable to computer viruses, physical, electrical or electronic break-
ins and similar
disruptions. We have experienced minor system interruptions in the past and may experience them again in the future. Any substantial
interruptions in the future could result in the loss of data and could completely impair our ability to generate revenues from our service. Our
servers also periodically experience directed attacks intended to cause a disruption in service. Any attempts by hackers to disrupt our service or
our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation. Our insurance may not be
sufficient to cover expenses related to attacks on our Web site, servers or internal systems. We do not presently have a full disaster recovery plan
in effect to cover the loss of all facilities and equipment. We do, however, have a secondary location that mirrors our core system infrastructure
to allow us to operate from a second location. We have business interruption insurance; however, we cannot be certain that our coverage will be
sufficient to compensate us for losses that may occur as a result of business interruptions. Later in 2012, we expect to move our corporate
headquarters, and we cannot be sure our systems and operations will operate without error or interruption as a result of this move.
A significant barrier to electronic commerce and communications is the secure transmission of confidential information over public networks.
Anyone who is able to circumvent our security measures could misappropriate confidential information or cause interruptions in our operations.
We may be required to expend significant capital and other resources to protect against potential security breaches or to alleviate problems
caused by any breach. We rely on specialized technology from within our own infrastructure to provide the security necessary for secure
transmission of postage and other confidential information. Advances in computer capabilities, new discoveries in security technology, or other
events or developments may result in a compromise or breach of the algorithms we use to protect customer transaction data. Should someone
circumvent our security measures, our reputation, business, financial condition and results of operations could be seriously harmed. Security
breaches could also expose us to a risk of loss or litigation and possible liability for failing to secure confidential customer information. As a
result, we may be required to expend a significant amount of financial and other resources to protect against security breaches or to alleviate any
problems that they may cause.
We are exposed to various risks associated with the credit and capital markets.
Our cash equivalents and investments are comprised of money market, U.S. government obligations, asset-
backed securities and public corporate
debt securities. The current global economic crisis has had an unprecedented negative impact on the global credit and capital markets. We have
unrealized losses on certain securities in our investment portfolio. Further sustained declines in the fair value of these securities could lead to an
increased risk that an other than temporary impairment exists. Uncertainties in the credit and capital markets or credit rating downgrades on any
investments in our portfolio could cause impairment to our investment portfolio, which could negatively affect our financial condition, cash
flow, and reported earnings.
Our results are impacted by the macroeconomic environment, which has experienced a severe global economic downturn during the
past few years.
We believe the performance of our PC Postage and PhotoStamps businesses are influenced by macro-
economic trends. The United States
economy has been experiencing a financial downturn characterized by high unemployment, limited availability of credit, increased rates of
default and bankruptcy and lower levels of consumer and business spending. A continuation of this economic downturn could negatively affect
our business, operating results and financial condition in a number of ways. For example, customers may leave our service, and efforts to attract
new customers may also be adversely impacted. In addition, customers may delay or decrease spending with us or may not pay us, or may delay
paying us.
Table of Contents
13