Computer Associates 2005 Annual Report Download - page 78

Table of Contents
example, we rely on “shrink-wrap” or “click-on” licenses which may be unenforceable in whole or in part in some jurisdictions in which
we operate. In addition, patents we have obtained may be circumvented, challenged, invalidated, or designed around by other companies.
Our inability to adequately protect our intellectual property for these or other reasons could adversely affect our business, financial
condition, operating results, and cash flow. Refer to Item 1, “Business – Proprietary Rights,” for additional information.
We may become dependent upon large transactions and the failure to close such transactions could adversely affect our business,
financial condition, operating results, and cash flow.
We have historically been dependent upon large-dollar enterprise transactions with individual customers. As a result of the flexibility
afforded by our Business Model, we anticipate that there will be fewer of these transactions in the future. There can be no assurances,
however, that we will not be reliant on large-dollar enterprise transactions in the future, and the failure to close such transactions could
adversely affect our business, financial condition, operating results, and cash flow.
Our customers’ data centers and IT environments may be subject to hacking or other breaches harming the market perception of the
effectiveness of our products.
If an actual or perceived breach of our customer’ s network security occurs, allowing access to our customers’ data centers or other parts
of their IT environments, regardless of whether the breach is attributable to our products, the market perception of the effectiveness of
our products could be harmed. Because the techniques used by computer hackers to access or sabotage networks change frequently and
may not be recognized until launched against a target, we may be unable to anticipate these techniques. Alleviating any of these
problems could require significant expenditures of our capital and diversion of our resources from development efforts. Additionally,
these efforts could cause interruptions, modifications, delays or cessation of our product licensing, which could cause us to lose existing
or potential customers adversely affecting our business, financial condition, operating results, and cash flow.
Our software products, data centers and IT environments may be subject to hacking or other breaches harming the market perception of
the effectiveness of our products.
Although we believe we have sufficient controls in place to prevent intentional disruptions, we expect to be an ongoing target of attacks
specifically designed to impede the performance of our products. Similarly, experienced computer programmers, or hackers, may
attempt to penetrate our network security or the security of our data centers and IT environments and misappropriate proprietary
information or cause interruptions of our services. If these intentionally disruptive efforts are successful, our activities could be
adversely affected, our reputation and future sales could be harmed, and our business, financial condition, operating results, and cash
flow could be adversely affected.
General economic conditions may lead our customers to delay or forgo technology upgrades which could adversely affect our business,
financial condition, operating results, and cash flow.
Our products are designed to improve the productivity and efficiency of our customers’ information processing resources. However, a
general slowdown in the world economy or a particular region could cause customers to delay or forgo decisions to license new products,
to upgrade their existing environments, or to acquire services, particularly with respect to discretionary spending in the software industry,
which could adversely affect our business, financial condition, operating results, and cash flow.
The use of third-party microcode could negatively impact our product development.
We anticipate ongoing use of microcode or firmware provided by hardware manufacturers. Microcode and firmware are essentially
software programs in hardware form and are, therefore, less flexible than other types of software. We believe that such continued use
will not have a significant impact on our operations and that our products will remain compatible with any changes to such code.
However, there can be no assurance that future technological developments involving such microcode will not have an adverse impact
on our business, financial condition, operating results, and cash flow.
The software business is marked by easy entry and large, entrenched businesses which may lead to increased competition and which
could have a material adverse effect on our business, financial condition, operating results, and cash flow.
Many companies with whom we compete, including IBM, Sun Microsystems, HP, and other large computer manufacturers, have
substantial resources, a larger installed base of customers in any particular market niche, as well as the ability to develop and market
software programs similar to and competitive with the products offered by us. Additionally, these producers can bundle hardware,
software, and services together, which is a disadvantage for us since we do not provide hardware and have far fewer services offerings.
Competitive products are also offered by numerous independent software companies that specialize in specific aspects of the highly
fragmented software industry. Some, like Microsoft, Oracle, and SAP, are the leading developers and vendors in their specialized
markets. In addition, new
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