Carbonite 2011 Annual Report Download - page 19

Table of Contents
us for the potentially significant losses, including the potential damage to the future growth of our business, that may result from the breach of customer
or employee privacy.
Many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory
disclosures regarding a security breach often lead to widespread negative publicity, which may cause our customers to lose confidence in the
effectiveness of our data security measures. Any security breach, whether successful or not, would harm our reputation and could cause the loss of
customers. Similarly, if a well-publicized breach of data security at any other online backup service provider or other major consumer website were to
occur, there could be a general public loss of confidence in the use of the internet for online backup services or commercial transactions generally. Any
of these events could have material adverse effects on our business, financial condition, and operating results.
We process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to
privacy, and our actual or perceived failure to comply with such obligations could harm our business.
We receive, store, and process personal information and other customer data. There are numerous federal, state, local, and foreign laws regarding
privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other customer data, the scope of which are
changing, subject to differing interpretations, and may be inconsistent among countries or conflict with other rules. We generally seek to comply with
industry standards and are subject to the terms of our privacy policies and privacy-related obligations to third parties. We strive to comply with all
applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection to the extent possible. However, it is
possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with
other rules or our practices. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to customers or
other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of
personally identifiable information or other customer data, may result in governmental enforcement actions, litigation, or public statements against us by
consumer advocacy groups or others and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and
business. Our customers may also accidentally disclose their passwords or store them on a mobile device which is lost or stolen, creating the perception
that our systems are not secure against third party access. Additionally, if third parties we work with, such as vendors or developers, violate applicable
laws or our policies, such violations may also put our customers’ information at risk and could in turn have an adverse effect on our business. Any
significant change to applicable laws, regulations or industry practices regarding the use or disclosure of our customers’
data, or regarding the manner in
which the express or implied consent of customers for the use and disclosure of such data is obtained, could require us to modify our services and
features, possibly in a material manner, and may limit our ability to develop new services and features that make use of the data that our customers
voluntarily share with us.
We may not be able to respond to rapid technological changes with new solutions, which could have a material adverse effect on our operating
results.
The online backup market is characterized by rapid technological change and frequent new product and service introductions. Our ability to attract
new customers and increase revenue from existing customers will depend in large part on our ability to enhance and improve our existing solutions,
introduce new features and products and sell into new markets. Customers may require features and capabilities that our current solutions do not have.
Our failure to develop solutions that satisfy customer preferences in a timely and cost-effective manner may harm our ability to renew our subscriptions
with existing customers and create or increase demand for our solutions, and may adversely impact our operating results.
The introduction of new services by competitors or the development of entirely new technologies to replace existing offerings could make our
solutions obsolete or adversely affect our business and operating results. In
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