Carbonite 2011 Annual Report Download - page 17

Table of Contents
The termination of our relationship with any major credit card company would have a severe, negative impact on our ability to collect revenue from
customers. Increases in credit card processing fees would increase our operating expenses and adversely affect our operating results.
Substantially all of our customers purchase our solutions online with credit cards, and our business depends upon our ability to offer credit card
payment options. The termination of our ability to process payments on any major credit card would significantly impair our ability to operate our
business and significantly increase our administrative costs related to customer payment processing. If we fail to maintain our compliance with the data
protection and documentation standards adopted by the major credit card issuers and applicable to us, these issuers could terminate their agreements
with us, and we could lose our ability to offer our customers a credit card payment option. If these issuers increase their credit card processing fees
because we experience excessive chargebacks or refunds or for other reasons, it could adversely affect our business and operating results.
Any significant disruption in service on our websites or in our computer systems could damage our reputation and result in a loss of customers,
which would harm our business and operating results.
Our brand, reputation, and ability to attract, retain and serve our customers are dependent upon the reliable performance of our websites, network
infrastructure and payment systems, and our customers’ ability to readily access their stored files. We have experienced interruptions in these systems in
the past, including server failures that temporarily slowed down our websites’ performance and our customers’ ability to access their stored files, or
made our websites and infrastructure inaccessible, and we may experience interruptions in the future. Interruptions in these systems, whether due to
system failures, computer viruses, physical or electronic break-ins, or other factors, could affect the security or availability of our websites and
infrastructure and prevent us from being able to continuously back up our customers’ data or our customers from accessing their data. In addition,
prolonged delays or unforeseen difficulties in connection with adding storage capacity or upgrading our network architecture when required may cause
our service quality to suffer. While we believe that there are alternative suppliers who could meet our needs, we currently depend primarily on one
provider of disk storage systems for our data centers. Problems with the reliability or security of our systems could harm our reputation. Damage to our
reputation and the cost of remedying these problems could negatively affect our business, financial condition, and operating results.
Our systems provide redundancy at the disk level, but do not keep separate, redundant copies of backed up customer files. Instead, we rely on the
fact that our customers, in effect, back up our system by maintaining the primary instance of their files. We do not intend to create redundant backup
sites for our solutions. As such, a total failure of our systems, or the failure of any of our systems, could result in the loss of or a temporary inability to
back up our customers’ data and result in our customers being unable to access their stored files. If one of our data centers fails at the same time that our
customers’
computers fail, we would be unable to provide backed up copies of their data. If this were to occur, our reputation could be compromised and
we could be subject to liability to the customers that were affected.
Our data centers are vulnerable to damage or interruption from human error, intentional bad acts, pandemics, earthquakes, hurricanes, floods, fires,
war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures, and similar events. As all of our data facilities are
located in a single metropolitan area, we may be more susceptible to the risk that a single event could significantly harm the operations of these
facilities. The occurrence of a natural disaster, power failure or an act of terrorism, vandalism or other misconduct, a decision to close the facilities
without adequate notice, or other unanticipated problems could result in lengthy interruptions in our services. The occurrence of any of the foregoing
events could damage our systems and hardware or could cause them to fail completely, and our insurance may not cover such events or may be
insufficient to compensate us for the potentially significant losses, including the potential harm to the future growth of our business, that may result from
interruptions in our service as a result of system failures.
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