Support.com 2006 Annual Report Download - page 33

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion of our financial condition and results of operations should be read in conjunction with our
consolidated financial statements and the related notes included elsewhere in this Form 10−K. The following discussion
includes forward−looking statements. Please refer to our cautionary statement on page 3 related to forward−looking
statements and our risks and uncertainties listed under Item 1A of this report.
Overview
SupportSoft is a leading provider of software and services that automate the resolution of technology problems. Our solutions
reduce technology support costs, improve customer satisfaction and enable new revenue streams for organizations worldwide. We
recently expanded our offerings and now provide technology support directly to consumers.
Our corporate customers are digital service providers (telecommunications and cable companies) and corporate IT departments.
Digital service providers use our products to automate the installation, activation and verification of broadband services, to reduce the
cost and improve the quality of support for customers, to enable the remote management of devices located at customer premises, and
to provide value−added services to consumers. Corporate IT departments and managed service providers (IT outsourcing firms) use
our software to improve the cost−effectiveness and efficiency of their support through an integrated portfolio of proactive service, self
service and assisted service capabilities.
In the second half of 2006, we announced a new offering to address the consumer technology support market. This offering is an
extension of our traditional business and relies upon our products, technology and expertise in technology problem resolution. The
new offering provides computer problem resolution for consumers over the phone and the Internet. We offer our consumer technology
support services through www.support.com and through consumer−facing companies such as PC manufacturers and digital service
providers.
Through December of 2006, our revenue has consisted entirely of software license fees and fees for maintenance, consulting,
hosting and training services. In recent years, we have licensed our software to customers predominately on a perpetual basis in which
we recognize the license revenue up front, assuming all criteria for revenue recognition under the applicable accounting rules have
been met. Maintenance fees relating to perpetual software licenses result in ratable revenue over the period of the maintenance term,
which is generally one year. Consulting and training revenues are generally recognized as the services are performed or in accordance
with predefined project milestones. Hosting fees are recognized ratably over the term of the hosting arrangement.
License revenue and total revenue grew in each of the three quarters following the first quarter of 2006, resulting in license
revenue of $16.4 million and total revenue of $45.0 million for the year ended December 31, 2006. Despite the sequential quarterly
increases in license revenue in the last three quarters of 2006, we have experienced a trend of decreasing annual license revenue over
the last three fiscal years. License revenue has decreased due to closing fewer large licensing transactions with corporate customers,
particularly U.S.−based digital service providers. To address the trend of decreasing annual revenue, we have made and are planning
to make a number of changes in the business. We have hired new senior leadership, including a new Chief Executive Officer, Senior
Vice President of Worldwide Sales, Senior Vice President of Global Services, Chief Marketing Officer, Senior Vice President of
Customer Service and Senior Vice President of Consumer Business Development. We have also hired new regional sales leadership
for the North America, EMEA and Asia/Pacific regions and made substantial changes in our sales force and sales compensation plans.
We have expanded our sales and marketing efforts internationally and with channel partners and increased the size of our professional
services organization.
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Source: SUPPORTSOFT INC, 10−K, March 16, 2007