TeleNav 2012 Annual Report Download - page 23

Table of Contents
The growth of our advertising revenue will depend on our ability to deliver location targeted, highly relevant ads to consumers on their mobile
connected devices. Our targeted advertising is highly dependent on the consumers allowing applications to have access to their location data. Users
may elect not to allow data sharing for targeted advertising for a number of reasons, in particular personal privacy concerns. Mobile operating
systems vendors and application developers are also promoting features that allow device users to disable device functionality that consumers may
elect to invoke. In addition, companies may develop products that enable users to prevent ads from appearing on their mobile device screens. If any
of these developments were to become widely used by consumers, our ability to deliver effective advertising campaigns on behalf of our advertiser
clients would suffer, which could hurt our ability to generate advertising revenue.
Our business practices with respect to data could give rise to liabilities or reputational harm as a result of governmental regulation, legal
requirements or industry standards relating to consumer privacy and data protection.
Our advertising services depend on our ability to collect, store and use information related to mobile devices and the ads we place, including a
device's geographic location for the purpose of targeting ads to the user of the device. Federal, state and international laws and regulations govern the
collection, use, retention, sharing and security of data that we collect across our mobile advertising platform. We strive to comply with all applicable
laws, regulations, policies and legal obligations relating to privacy and data protection. However, it is possible that these requirements may be
interpreted and applied in a manner that is inconsistent with our practices. Any failure, or perceived failure, by us to comply with such laws could
result in proceedings or actions against us by governmental entities, consumers or others. Such proceedings or actions could hurt our reputation, force
us to spend significant amounts to defend ourselves, distract our management, increase our costs of doing business, require us to change our
advertising services or disclosures, adversely affect the demand for our services and ultimately result in the imposition of monetary liability. We may
also be contractually liable to indemnify and hold harmless our clients from the costs or consequences of inadvertent or unauthorized disclosure of
data that we store or handle as part of providing our services.
The regulatory framework for privacy issues worldwide is evolving, and various government and consumer agencies and public advocacy
groups have called for new regulation and changes in industry practices, including some directed at the mobile and advertising industries in
particular. It is possible that new laws, regulations, standards, recommendations, best practices or requirements will be adopted that would affect our
business, particularly with regard to location-based services, collection or use of data to target ads and communication with consumers via mobile
devices. To the extent that we or our clients are subject to new law or recommendations or choose to adopt new standards, recommendations, or other
requirements, we may have greater compliance burdens. If we are perceived as not operating in accordance with industry best practices or any such
guidelines or codes with regard to privacy, our reputation may suffer and we could lose relationships with advertiser or developer partners.
We expect that we will incur losses in fiscal 2014 and other periods, as we make further expenditures to enhance and expand our operations in
order to support growth and diversification of our business.
As a percentage of revenue, our net income was 21% , 16% and 7% in fiscal 2011 , 2012 and 2013 , respectively. Our revenue from paid
wireless carrier mobile navigation has declined and we expect it to continue to do so. Due to the lengthy design cycle in automotive navigation and
the early nature of our advertising business, we anticipate that we will incur a net operating loss in fiscal 2014, for the first time since 2007 as we do
not expect to reduce our expenditures proportionately with the anticipated decline in revenue.
Although we are working to replace wireless carrier revenue, efforts to develop new services and products and attract new customers require
investments in anticipation of longer term revenue. For example, the design cycle for automotive navigation products and services is 18 months to 24
months and in order to win designs and achieve revenue from this growth area, we have to make investments two to four years before we anticipate
receiving revenue, if any. We intend to make additional investments in systems and continue to expand our operations to support diversification of
our business, but it is likely that these efforts at diversification will not replace our declining wireless carrier revenue in the short-term, if at all. We
also anticipate that as we replace some of our personnel, we will do so with employees in higher cost geographic areas who have different skills. As a
result of these factors, we believe our operating income may become a net operating loss and that we will incur net losses at least through fiscal 2014.
Furthermore, our investments and expenditures may not result in the growth that we anticipate. In the event we decide to reduce expenses in the
future, we may not be able to reduce our expenditures on a timely basis, if at all, if we do not generate anticipated revenue.
Our quarterly revenue and operating results have fluctuated in the past and may fluctuate in the future due to a number of factors. As a result,
we may fail to meet or exceed the expectations of securities analysts or investors, which could cause our stock price to decline.
Our quarterly revenue and operating results may vary significantly in the future. Therefore, you should not rely on the results achieved in any
one quarter as an indication of future performance. Period to period comparisons of our revenue and
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