Citrix 2007 Annual Report Download - page 24

In addition, to the extent our revenue grows, if at all, we believe that our cost of revenues and certain
operating expenses could also increase. We believe that we could incur additional costs, including royalties, as
we develop, license or buy new technologies or enhancements to our existing products and services. These added
costs and royalties could increase our cost of revenues and operating expenses and lower our gross margins. For
example, due to our recent acquisitions and the anticipated growth of the acquired companies, we currently
expect that our future revenue will include a greater level of revenue from appliance sales as compared to our
historical level of appliance sales, which we expect will reduce our gross margins from their historical levels.
Furthermore, as our income from the recent acquisitions increases, we expect that our effective tax rate may
increase due to the taxable income from these acquisitions being earned primarily in our geographic locations
that are taxed at a higher rate. However, we cannot currently quantify the costs for such transactions that have not
yet occurred or of these developing trends in our business. In addition, we may need to use a substantial portion
of our cash and investments or issue additional shares of our common stock to fund these additional costs.
During the past two years, a large portion of our growth has been attributable to the growth of our
Application Virtualization products, as well as growth in our Online Services and Application Networking
products. We cannot provide any assurance that these markets and the revenues we derive from these markets
will continue to grow. In addition, over the last four years we have grown our force of sales professionals that
work closely with partners to sell to primary IT buyers, including Strategic IT Executives, Network Architects,
IT Infrastructure Managers and Desktop Operations Managers, to address the multiple selling and buying
opportunities presented by our expanded product lines. These and other account penetration efforts are part of our
strategy to increase the usage of our Citrix Delivery Center products within our customer’s IT organizations. We
cannot provide any assurance that this strategy will be successful or that the release of our application delivery
infrastructure products or other new products or services will increase our revenue growth rate.
We cannot assure you that our operating expenses will be lower than our estimated or actual revenues in any
given quarter. If we experience a shortfall in revenue in any given quarter, we likely will not be able to further
reduce operating expenses quickly in response. Any significant shortfall in revenue could immediately and
adversely affect our results of operations for that quarter. Also, due to the fixed nature of many of our expenses
and our current expectation for revenue growth, our income from operations and cash flows from operating and
investing activities could be lower than in recent years.
Acquisitions present many risks, and we may not realize the financial and strategic goals we anticipate at the
time of an acquisition.
Our growth is dependent upon market growth, our ability to enhance existing products and services, and our
ability to introduce new products and services on a timely basis. We intend to continue to address the need to
develop new products and services and enhance existing products and services through acquisitions of other
companies, product lines and/or technologies. However, acquisitions, including those of high-technology
companies, are inherently risky. We cannot provide any assurance that any of our previous acquisitions,
including our acquisitions over the past three years, or future acquisitions will be successful in helping us reach
our financial and strategic goals either for that acquisition or for us generally or that the combined company
resulting from any acquisition will continue to support the growth achieved by the companies separately.
The risks we commonly encounter in managing and integrating acquisitions are:
• difficulties and delays integrating the operations, technologies, and products of the acquired
companies;
• undetected errors or unauthorized use of a third-party’s code in products of the acquired companies;
• the diversion of management’s attention from normal daily operations of the business;
• potential difficulties in completing projects associated with purchased in-process research and
development;
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