Computer Associates 2006 Annual Report Download - page 40

future products or the enhancement of existing products. We may also choose to pay a premium price for such a
license in certain circumstances where continuity of the product would outweigh the premium cost of the license.
We do not consider the revenue from products using software licensed from third parties to be material. However,
there can be no assurance that, at a given point of time, any of the above will not have an adverse impact on our
business, financial condition, operating results and cash flow.
Certain software we use is from open source code sources which under certain circumstances may lead to
increased costs and, therefore, decreased cash flow.
Some of our products contain software from open source code sources. The use of such open source code may
subject us to certain conditions, including the obligation to offer our products that use open source code for no cost.
We monitor our use of such open source code to avoid subjecting our products to conditions we do not intend.
However, the use of such open source code may ultimately subject some of our products to unintended conditions so
that we are required to take remedial action that may divert resources away from our development efforts. We
believe that the use of such open source code will not have a significant impact on our operations and that our
products will be viable after any remediation efforts. However, there can be no assurance that future conditions
involving such open source code will not have an adverse impact on our business, financial condition, operating
results and cash flow.
Discovery of errors in our software could adversely affect our revenues and earnings and subject us to
product liability claims, which may be costly and time consuming.
The software products we offer are inherently complex. Despite testing and quality control, we cannot be certain
that errors will not be found in current versions, new versions or enhancements of our products after commencement
of commercial shipments. If new or existing customers have difficulty deploying our products or require significant
amounts of customer support, our operating margins could be adversely affected. Moreover, we could face possible
claims and higher development costs if our software contains undetected errors or if we fail to meet our customers’
expectations. Significant technical challenges also arise with our products because our customers purchase and
deploy our products across a variety of computer platforms and integrate them with a number of third-party software
applications and databases. These combinations increase our risk further because in the event of a system-wide
failure, it may be difficult to determine which product is at fault; thus, we may be harmed by the failure of another
supplier’s products. As a result of the foregoing, we could experience:
• Loss of or delay in revenues and loss of market share;
• Loss of customers, including the inability to do repeat business with existing key customers;
• Damage to our reputation;
• Failure to achieve market acceptance;
• Diversion of development resources;
• Increased service and warranty costs;
• Legal actions by customers against us which could, whether or not successful, increase costs and distract our
management;
• Increased insurance costs; and
• Failure to successfully complete service engagements for product installations and implementations.
In addition, a product liability claim, whether or not successful, could be time-consuming and costly and thus could
have a material adverse affect on our business, financial condition, operating results and cash flow.
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