Computer Associates 2006 Annual Report Download - page 42

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 customers’ 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, delays or cessation of our product licensing, or modification of our software, 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, particularly with respect to
discretionary spending for software, could cause customers to delay or forgo decisions to license new products, to
upgrade their existing environments or to acquire services, 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 embedded in hardware 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.
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
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