Overstock.com 2006 Annual Report Download - page 24

additional expense, impaired quality and speed of order fulfillment or delays in reporting accurate financial information.
If the facilities where substantially all of our computer and communications hardware is located fail, our business, results of
operations and financial condition will be harmed.
Our success, and, in particular, our ability to successfully receive and fulfill orders and provide high-quality customer service,
largely depends on the efficient and uninterrupted operation of our computer and communications systems. Substantially all of our
computer and communications hardware is located at a single co-location facility in Salt Lake City, Utah, with a partially redundant
back-up system located at our corporate headquarters in Salt Lake City. Although we have designed our back-up system in an effort to
avoid or minimize service interruptions in the event of a failure of our main facility, our systems and operations are vulnerable to
damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, break-ins, earthquake
and similar events. We do not have a formal disaster recovery plan and our business interruption insurance may be insufficient to
compensate us for losses that may occur. Despite the implementation of network security measures, our servers are vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions, delays, loss of critical
data or the inability to accept and fulfill customer orders. The occurrence of any of the foregoing risks could harm our business,
prospects, financial condition and results of operations.
We may be unable to protect our proprietary technology or keep up with that of our competitors.
Our success depends to a significant degree upon the protection of our software and other proprietary intellectual property rights.
We may be unable to deter misappropriation of our proprietary information, detect unauthorized use and take appropriate steps to
enforce our intellectual property rights. In addition, our competitors could, without violating our proprietary rights, develop
technologies that are as good as or better than our technology.
Our failure to protect our software and other proprietary intellectual property rights or to develop technologies that are as good as
our competitors' could put us at a disadvantage to our competitors. In addition, the failure of the third parties whose products we offer
for sale on our Websites to protect their intellectual property rights, including their domain names, could impair our operations. These
failures could harm our business, results of operations and financial condition.
If we do not respond to rapid technological changes, our services could become obsolete and we could lose customers.
To remain competitive, we must continue to enhance and improve the functionality and features of our e-commerce businesses.
We may face material delays in introducing new services, products and enhancements. If this happens, our customers may forgo the
use of our Websites and use those of our competitors. The Internet and the online commerce industry are rapidly changing. If
competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our
existing Websites and our proprietary technology and systems may become obsolete. Our failure to respond to technological change or
to adequately maintain, upgrade and develop our computer network and the systems used to process customers' orders and payments
could harm our business, prospects, financial condition and results of operations.
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