Support.com 2009 Annual Report Download - page 16

Table of Contents
acquisition candidate, we may not be able to successfully negotiate the terms of the acquisition. Our management may not be able to effectively implement our
acquisition program and internal growth strategy simultaneously. The integration of acquisitions involves a number of risks and presents financial, managerial
and operational challenges. We may have difficulty, and may incur unanticipated expenses related to, integrating management and personnel from these acquired
entities with our management and personnel. Our failure to identify, consummate or integrate suitable acquisitions could adversely affect our business and results
of operations. We cannot readily predict the timing, size or success of our future acquisitions. Even successful acquisitions could have the effect of reducing our
cash balances. Acquisitions and divestitures could involve a number of other potential risks to our business, including the following, any of which could harm our
business results:
• Unanticipated costs and liabilities and unforeseen accounting charges or fluctuations;
• Delays and difficulties in delivery of services and products;
• Failure to effectively integrate or separate management information systems, personnel, research and development, marketing, sales and support
operations;
• Loss of key employees;
• Economic dilution to gross and operating profit;
• Diversion of management’s attention from other business concerns and disruption of our ongoing business;
• Difficulty in maintaining controls and procedures;
• Uncertainty on the part of our existing customers about our ability to operate after a transaction;
• Loss of customers;
• Loss of partnerships;
• Declines in revenue and increases in losses;
• Failure to realize the potential financial or strategic benefits of the acquisition or divestiture; and
• Failure to successfully further develop the combined or remaining technology, resulting in the impairment of amounts recorded as goodwill or other
intangible assets.
We may realize losses on our investments in auction-rate securities or be unable to liquidate these investments at desired times in desired amounts.
At December 31, 2009, we had $22.7 million, fair value, of auction-rate securities (“ARS”). Historically, our ARS were highly liquid, and used a Dutch
auction process that resets the applicable interest rate at predetermined intervals, typically every 28 to 35 days, to provide liquidity at par. However, as a result of
disruption in the global credit and capital markets, the auctions for all of our ARS failed beginning in February 2008 when sell orders exceeded buy orders.
Accordingly, we were unable to sell any of our ARS. Of the $24.1 million, par value, of ARS as of December 31, 2009, approximately $20.5 million is held by
UBS and has been classified as trading securities because of the ARS put option described below. Accordingly, during the year of 2009 the realized loss on the
ARS put option was fully offset with the realized gain on the UBS ARS.
In November 2008, we accepted an offer from UBS, entitling UBS, at any time during a two-year period from June 30, 2010 through July 2, 2012, to buy
our ARS originally purchased from UBS at par value. In accepting the offer, we granted UBS the authority to sell or auction the ARS at par at any time up until
the expiration date of the offer and released UBS from any claims relating to the marketing and sale of ARS. As part of this offer, we not only received a
guarantee from UBS to purchase our UBS ARS holdings at par value, but also the right to a loan from UBS at no net cost to us for up to the amount of the par
value of our eligible ARS holdings. Prior to any sale of our ARS, ARS will continue to accrue and pay interest as determined by the auction process or the terms
specified in the ARS if the auction process fails. UBS’s obligations under the offer are not
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Source: Support.com, Inc., 10-K, March 12, 2010 Powered by Morningstar® Document Research℠