Incredimail 2010 Annual Report Download - page 14

Our investment portfolio may be impaired by disruptions in the financial and credit markets.
Our investment portfolio currently consists of US government debentures, US government agencies and corporate debt securities,
which the Company classified at December 31, 2010 as "available-for-
sale" marketable securities or cash equivalents. As of December 31, 2010,
we hold approximately $7 million in corporate debt securities, $9 million in government debentures and $8 million in securities of US
government agencies.
Due to significant disruptions in the financial and credit markets in the past, corporate debt securities in our portfolio could be subject to
a possible increased risk of default due to bankruptcy, lack of liquidity, operational failure or other factors affecting the issuers of those
securities. In addition, securities in our portfolio are subject to other risks, such as credit, liquidity, market and interest rate risks, which may be
exacerbated by the recent market disruptions. We may be required to adjust the carrying value of our investment securities due to a default, lack
of liquidity or other event.
Any such adjustment which is considered to be other-then-
temporary would be recorded in our consolidated statement of income which
could materially adversely impact our consolidated results of operations and financial condition.
If we are deemed to be not in compliance with applicable data protection laws, our operating results could be materially affected.
We collect and maintain certain information about our customers in our database. Such collection and maintenance of customer
information is subject to data protection laws and regulations in Israel and may be subject to laws and regulations in, the United States and other
countries as well. A failure to comply with applicable regulations could result in class actions, governmental investigations and orders, and
criminal and civil liabilities, which could materially affect our operating results.
Although we strive to comply with the applicable laws and regulations and use our best efforts to comply with the world evolving
standards of privacy and inform our customers of our business practices prior to any installations of our software, it is possible that these laws
may be interpreted and applied in a manner that is inconsistent with our data practices or that it may be argued that our practices do not comply
with other countries privacy laws. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data
practices, which in turn could have a material effect on our business. See "Item 4.B Business Overview —
Government Regulation" for
additional discussion of applicable regulations.
If there are privacy or security concerns regarding our collection, use and handling of personal information, we could incur substantial
expenses.
Although we strive to comply with the strict data security requirements and take all reasonable steps to insure the security of personal
information, concerns may be expressed, from time to time, about whether our products compromise the privacy or confidentiality of the
information of users and others. Concerns about our collection, use, sharing or handling of personal information or other privacy related matters,
even if unfounded, could damage our reputation and operating results. See "Item 4.B Business Overview —
Government Regulation" for
additional discussion of applicable regulations.
We depend on a third party Internet and telecommunication provider to operate our website. Temporary failure of these services would
reduce our revenues and damage our reputation, and securing alternate sources for these services could significantly increase our
expenses.
We depend on Bezeq International Ltd., a third party provider of Internet and related telecommunication services, including hosting and
location facilities, to operate our website. This company may not continue to provide services to us without disruptions in services at the current
cost or at all. Such a disruption in services, even temporary, would reduce our revenues from product sales, and possibly even from search,
depending on the extent of disruption. While we believe that there are many alternative providers of hosting and other communication services
available to us, and the company has a plan for adjusting and adapting in such an event, the costs associated with any transition to a new service
provider could be substantial and require us to reengineer our computer systems and telecommunications infrastructure to accommodate a new
service provider. This process could be both expensive and time consuming and could result in lost business both during the transition period and
after.
Our servers and communications systems could be damaged or interrupted by fire, flood, power loss, telecommunications failure,
earthquakes, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-
ins and similar events or disruptions. Although
we maintain back-
up systems for our servers, any of these events could cause system interruption, delays, loss of critical data and lost registered
users and revenues.
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