Earthlink 2010 Annual Report Download - page 28

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Table of Contents
may be curtailed. If such vendors were to fail, we may not be able to replace them without disruption to, or deterioration of, our service and we
may incur higher costs. Acquirers of distressed suppliers may not continue to upgrade technology associated with the type of equipment we use
in our network. If we were required to purchase another manufacturer's equipment, we could incur significant initial costs to integrate the
equipment into our network and to train personnel to use the new equipment, which could have an adverse effect on our financial condition and
results of operations. Any interruption in the services provided by our third-
party vendors could adversely affect our business, financial position,
results of operations and cash flows.
If we do not continue to innovate and provide products and services that are useful to individual subscribers and business customers, we may
not remain competitive, and our revenues and operating results could suffer.
The market for Internet and telecommunications services is characterized by changing technology, changes in customer needs and frequent
new service and product introductions, and we may be required to select one emerging technology over another. Our future success will depend,
in part, on our ability to use leading technologies effectively, to continue to develop our technical expertise, to enhance our existing services and
to develop new services that meet changing customer needs on a timely and cost-
effective basis. We may not be able to adapt quickly enough to
changing technology, customer requirements and industry standards. Such changes could include the increasing use of wireless forms of
communication, such as handheld Internet-
access devices and mobile phones, new competitors such as VoIP providers and the acceleration of
the adoption of broadband due to government funding to deploy broadband to rural areas. In addition, the development and offering of new
services in response to new technologies or consumer demands may require us to increase our capital expenditures significantly. Moreover, new
technologies may be protected by patents or other intellectual property laws and therefore may be available only to our competitors and not to us.
Any of these factors could adversely affect our revenues and profitability.
Our failure to implement cost reduction initiatives will adversely affect our results of operations.
We have adopted an operating framework that includes a disciplined focus on operational efficiency. The success of our operating
efficiencies and cost reductions is necessary to achieve the desired synergies we hope to achieve with the integration of our recent and potential
future acquisitions. In addition, as part of this framework, during the past three years we have implemented significant cost reduction initiatives,
including reducing our headcount, outsourcing certain functions, streamlining internal processes, renegotiating contracts with network service
providers and consolidating or closing certain facilities. We plan to continue to implement cost reduction initiatives and to manage our business
more efficiently. However, we believe that large-
scale cost reduction opportunities that we have previously experienced in our legacy business
will be more limited in the future and in some cases, we may incur upfront costs in connection with implementing certain initiatives. In addition,
although we seek to align our cost structure with trends in revenue, we do not expect to be able to reduce our cost structure in our Consumer
Services segment to the same extent as those declines in revenue and our cost reduction initiatives might not yield the anticipated benefits.
Finally, we may not be able to implement the same discipline for operations related to our recent and potential future acquisitions. If we do not
recognize the anticipated benefits of our cost reduction initiatives, or do so in a timely manner, our profitability and cash flows will decline.
We will require a significant amount of cash, which may not be available to us, to service our debt and fund our other liquidity needs.
On November 15, 2011, holders of our $255.8 million outstanding principal amount of 3.25% Convertible Senior Notes Due 2026 (the
"EarthLink Notes") have the right under the governing indenture to require us to repurchase the EarthLink Notes. Our ability to repurchase these
EarthLink Notes as well as to make payments on, or to refinance or repay, our debt, fund planned capital expenditures, pay
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