Computer Associates 2005 Annual Report Download - page 79

Table of Contents
companies enter the market on a frequent and regular basis, offering products that compete with those offered by us. Increased
competition also results from consolidation of existing companies within the industry. Additionally, many customers historically have
developed their own products that compete with those offered by us. Competition from any of these sources can result in price reductions
or displacement of our products, which could have a material adverse effect on our business, financial condition, operating results, and
cash flow.
We may lose access to third-party operating systems which would adversely affect future product development.
In the past, certain of our licensees using proprietary operating systems were furnished with “source code,” which makes the operating
system understandable to programmers; “object code,” which directly controls the hardware; and other technical documentation. Since
the availability of source code facilitated the development of systems and applications software, which must interface with the operating
systems, independent software vendors, such as us, were able to develop and market compatible software. Microsoft, IBM, and other
vendors have a policy of restricting the use or availability of the source code for some of their operating systems. To date, this policy has
not had a material effect on us. Some companies, however, may adopt more restrictive policies in the future or impose unfavorable terms
and conditions for such access. These restrictions may, in the future, result in higher research and development costs for us in connection
with the enhancement and modification of our existing products and the development of new products. Although we do not expect that
such restrictions will have this adverse effect, there can be no assurances that such restrictions or other restrictions will not have a
material adverse effect on our business, financial condition, operating results, and cash flow.
The markets for some or all of our key product areas may not grow.
As announced in April 2005, our products will be aligned by software business unit. Our business units will consist of Enterprise
Systems Management, Security Management, Storage Management, Business Service Optimization (BSO), and the CA Products Group
— which will encompass solutions from a number of CA brands that fall outside of our core areas of systems and security management.
Some or all of these areas may not grow, may decline in growth, or customers may decline or forgo use of products in some or all of these
product areas. This is particularly true in newly emerging areas. A decline in these product areas could result in decreased demand for
our products and services, which would adversely impact our business, financial condition, operating results, and cash flow.
Third parties could claim that our products infringe their intellectual property rights which could result in significant litigation expense
or settlement with unfavorable terms that could adversely affect our business, financial condition, operating results, and cash flow.
From time to time we receive notices from third parties claiming infringement of various forms of their intellectual property.
Investigation of these claims, whether with or without merit, can be expensive and could affect development, marketing, or shipment of
our products. As the number of software patents issued increases, it is likely that additional claims, which with or without merit, will be
asserted. Defending against such claims is time-consuming and could result in significant litigation expense or settlement with
unfavorable terms that could adversely affect our business, financial condition, operating results, and cash flow.
Fluctuations in foreign currencies could result in transaction losses.
Most of the revenue and expenses of our foreign subsidiaries are denominated in local currencies. Given the relatively long sales cycle
that is typical for many of our products, foreign currency fluctuations could result in substantial changes in the foreign currency impact
on these transactions. Additionally, fluctuations of the exchange rate of foreign currencies against the U.S. dollar can affect our revenue
within those markets, all of which may adversely impact our business, financial condition, operating results, and cash flow.
Our stock price is subject to significant fluctuations.
Our stock price is subject to significant fluctuations in response to variations in quarterly operating results, the gain or loss of significant
license agreements, changes in earnings estimates by analysts, announcements related to our past accounting issues, announcements of
technological innovations or new products by us or our competitors, changes in domestic and international economic and business
conditions, general conditions in the software and computer industries, and other events or factors. In addition, the stock market in
general has experienced extreme price and volume fluctuations that have affected the market price of many companies in industries that
are similar or related to those in which we operate and that have been unrelated to the operating performance of these companies. These
market fluctuations have in the past adversely affected and may continue to adversely affect the market price of our common stock,
which in turn could affect the value of our stock-based compensation and our ability to retain and attract key employees.
42