Chegg 2013 Annual Report Download - page 65

acquired companies and if our integration efforts are not successful we may not be able to offset our acquisition
costs. Acquisitions involve many risks, including the following:
• an acquisition may negatively impact our results of operations because it:
• may require us to incur charges and substantial debt or liabilities,
• may cause adverse tax consequences, substantial depreciation or deferred compensation charges,
• may result in acquired in-process research and development expenses or in the future may require
the amortization, write-down or impairment of amounts related to deferred compensation,
goodwill and other intangible assets, or
• may give rise to various litigation risks;
• we may not generate sufficient financial return to offset acquisition costs;
• we may encounter difficulties or unforeseen expenditures in integrating the business, technologies,
products, operations and personnel of any company that we acquire, particularly if key personnel of the
acquired company decide not to work for us;
• an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract
our management;
• an acquisition may result in a delay in adoption rates or reduction in engagement rates for our products
and services and those of the company acquired by us due to student uncertainty about continuity and
effectiveness of service from either company;
• we may encounter difficulties in, or may be unable to, successfully sell or otherwise monetize any
acquired products; and
• an acquisition may involve the entry into geographic or business markets in which we have little or no
prior experience.
Acquisitions can be complex and time consuming to integrate. For example, we acquired Zinch in 2011 and
are currently in the process of transitioning Zinch users to the Chegg platform and integrating the Zinch brand
into Chegg by the end of 2014. We may not successfully transition these users to the Chegg platform.
In addition, we have made, and may make in the future, acquisitions that we later determine are not
complementary with our evolving business model. For example, in 2011 we acquired, but later decided not to
integrate into our business, Notehall and Student of Fortune and, as a result, in 2012 recorded an aggregate
impairment charge of $0.6 million related to the write-off of intangible assets from both acquisitions.
Litigation arising from claims and lawsuits against companies that we acquire could be time-consuming,
costly and detrimental to our reputation. For example, shortly after our acquisition of Student of Fortune in
September 2011, a consortium of five publishers threatened litigation against us and the founders of Student of
Fortune for copyright infringement for acts that occurred prior to the acquisition date. We settled the matter in
October 2011. In February 2013, Apollo Group and University of Phoenix filed a complaint against us, our Chief
Executive Officer and others in the U.S. District Court for the Southern District of New York for copyright
infringement relating to content uploaded by third parties and made available through the Student of Fortune
website that occurred prior to and following the acquisition date. We settled this matter in June 2013. We also
decided to discontinue the Student of Fortune business and shut down the website in August 2013. While these
settlements have not had a material impact on our financial condition, we may be subject to similar lawsuits in
the future, including in connection with our other services. The outcome of any such lawsuits may not be
favorable to us and could have a material adverse effect on our financial condition.
We may pursue additional acquisitions in the future to add specialized employees, complementary
companies, products or technologies. Our ability to acquire and integrate larger or more complex companies,
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