Incredimail 2010 Annual Report Download - page 13

Should this trend accelerate faster than the company’
s ability to provide differentiating advantages to its downloadable solution, this
could result in fewer downloads of our product and our ability to offer search services, less use of our product, fewer purchases of our products
and services and loss of market share. See "Item 4.B Business Overview — Competition" for additional discussion of our competitive market.
The market for wallpapers, screensavers and photograph management tools is highly competitive, and if we cannot compete effectively,
we may not be able to generate revenues or achieve significant market share.
Our Magentic product is a desktop enhancer and offers brand-
new graphically enriched ways to view and enjoy personal photos. Our
PhotoJoy product focuses on further enhancing the capability for enjoying personal photos. These products currently compete in the market for
wallpapers, screensavers and PC software managing and presenting personal photographs, aiming to offer a creative, personal and entertaining
experience for PC users. Our main competitors in these areas include Screensavers.com, Picasa by Google, and webshots©
by American
Greetings Corp. (NYSE: AM). Competition with these products could require increased investments in R&D and Marketing expenses as well as
cause fewer downloads and registrations of our product.
Many of our competitors have more established brands, products and customer relationships than we do, which could inhibit our market
penetration efforts even if they may not offer a similar variety, currently free of charge, such as American Greetings Corp. (webshots©).
If we
are unable to achieve continued market penetration, we will not be able to compete effectively.
In addition, many of our other current and potential competitors have significantly greater financial, research and development and sales
and marketing resources than we have. These competitors could use their greater financial resources to acquire other companies to gain enhanced
name recognition and market share, as well as to develop new technologies, products or features that could effectively compete with our product.
Demand for our products could be diminished by equivalent or superior products and technologies offered by competitors. See "Item 4.B
Business Overview — Competition" for additional discussion of our competitive market.
We may use a substantial portion of our invested resources to acquire an unspecified business. These acquisitions could divert our
resources, cause dilution to our shareholders and adversely affect our financial results.
We may use a portion of our invested resources to acquire complementary products, technologies or businesses. In December 2006, we
acquired the assets of a transaction processing company called BizChord Consulting Corporation and, although a relatively small acquisition, in
December 2008, we decided to terminate BizChord’s independent activities and restrict its activity to processing the Company’
s own
transactions and have since reduced the use of that solution. As a result, since the acquisition, we have written off our entire investment. Prior to
such acquisition our management had no experience making acquisitions or integrating acquired businesses. Negotiating potential acquisitions or
integrating newly-acquired products, technologies or businesses could divert our management’
s attention from other business concerns and could
be expensive and time-
consuming. Acquisitions could expose our business to unforeseen liabilities or risks associated with the business or assets
acquired or with entering new markets. In addition, we might lose key employees while integrating new organizations. Consequently, we might
not effectively integrate any acquired products, technologies or businesses, and might not achieve anticipated revenues or cost benefits. In
addition, future acquisitions could result in customer dissatisfaction, performance problems with an acquired product, technology or company, or
issuances of equity securities that cause dilution to our existing shareholders. Furthermore, we may incur contingent liability or possible
impairment charges related to goodwill or other intangible assets or other unanticipated events or circumstances relating to the acquisition, and
we may not have, or may not be able to enforce, adequate remedies in order to protect our Company. If any of these or similar risks relating to
acquiring products, technologies or businesses should occur in the future on a scale that is larger than the effect of the acquisition described
above, our business could be materially harmed.
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