Computer Associates 2007 Annual Report Download - page 31

We have a significant amount of debt and failure to generate sufficient cash as our debt becomes due or to renew credit
lines prior to their expiration may adversely affect our business, financial condition, operating results and cash flow.
As of March 31, 2007, we had approximately $2.6 billion of debt outstanding, consisting of unsecured fixed-rate senior note
obligations, convertible senior notes, and credit facility borrowings. Refer to Item 7, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations — Contractual Obligations and Commitments”, for the payment schedule of
our long-term debt obligations, inclusive of interest. We expect that existing cash, cash equivalents, marketable securities,
cash provided from operations and our bank credit facilities will be sufficient to meet ongoing cash requirements. However,
failure to generate sufficient cash as our debt becomes due or to renew credit lines prior to their expiration may adversely
affect our business, financial condition, operating results and cash flow.
Failure to protect our intellectual property rights would weaken our competitive position.
Our future success is highly dependent upon our proprietary technology, including our software. Failure to protect such
technology could lead to our loss of valuable assets and competitive advantage. We protect our proprietary information
through the use of patents, copyrights, trademarks, trade secret laws, confidentiality procedures and contractual provisions.
Notwithstanding our efforts to protect our proprietary rights, policing unauthorized use or copying of our proprietary
information is difficult. Unauthorized use or copying occurs from time to time and litigation to enforce intellectual property
rights could result in significant costs and diversion of resources. Moreover, the laws of some foreign jurisdictions do not
afford the same degree of protection to our proprietary rights as do the laws of the United States. For example, for some of our
products, 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. If we do not adequately protect our intellectual property for these or other reasons our business, financial
condition, operating results and cash flow could be adversely affected. Refer to “Item 1, Business — (c) Narrative Description
of the Business — Technological Expertise”, 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 sales to government clients subject us to risks, including early termination, audits, investigations,
sanctions and penalties.
Approximately 11% of our total deferred subscription value at March 31, 2007 is associated with multi-year contracts signed
with the U.S. Federal Government and other U.S. state and local governmental agencies.These contracts are generally subject
to annual fiscal funding approval and/or may be terminated at the convenience of the government.Termination of a contract or
funding for a contract could adversely affect our sales, revenue and reputation. Additionally, government contracts are
generally subject to audits and investigations which could result in various civil and criminal penalties and administrative
sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments,
fines and suspensions or debarment from doing business with the government.
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 ITenvironments, 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.
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