Overstock.com 2012 Annual Report Download - page 20

Table of Contents
If the facility where substantially all of our computer and communications hardware is located fails, our business, prospects, financial condition
and results of operations could be harmed.
If the facility where substantially all of our computer and communications hardware is located fails, or if we suffer an interruption or degradation
of services at the facility for any reason, our business could 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 less than six miles from the co-location facility. In the event of an earthquake or major local disaster, or any
other cause of interruption of service, both our primary and back-up sites could be adversely affected. Although we have designed our back-up system
in an effort to 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, cyber-attacks, acts of war, break-ins, earthquake and similar
events. In the event of a failure of our primary facility, the failover to our back-up facility would take at least several hours, during which time our
Website would be completely shut down. Our back-up facility is designed to support sales at a level slightly above our average daily sales, but is not
adequate to support sales at a high level. The back-up facility may not process effectively during time of higher traffic to our Website and may process
transactions more slowly and may not support all of the functionality of our primary site. These limitations could have an adverse effect on our
conversion rate and sales. Our disaster recovery plan may be inadequate, and we do not carry business interruption insurance sufficient to compensate
us for the losses that could occur. Despite our implementation of network security measures, our servers are vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions, the occurrence of any of 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.
We depend upon third-party delivery services to deliver products to our customers on a timely and consistent basis. Deterioration in our
relationship with any one of these third parties could decrease our ability to track shipments, cause shipment delays, and increase our shipping
costs and the number of damaged products.
We rely upon third party delivery providers for the shipment of products to customers. We cannot be sure that these relationships will continue on
terms we find acceptable, or at all. Increases in shipping costs or delivery times, particularly during the holiday season, could harm our business. If our
relationships with these third parties are terminated or impaired or if these third parties are unable to deliver products for us, whether as a result of labor
shortage, slow down or stoppage, deteriorating financial or business condition, terrorist attacks, cyber-attacks, Internet or other infrastructure or
communications impairment, natural disasters, or for any other reason, we would be required to use alternative carriers for the shipment of products to
our customers. In addition, conditions such as adverse weather or natural disasters can prevent any carrier from performing its delivery services, which
can have an adverse effect on our customers' satisfaction with us. In any of these circumstances, we may be unable to engage alternative carriers on a
timely basis, upon terms we find acceptable, or at all. Changing carriers, or absence of carrier availability, could have a material adverse effect on our
business.
We depend upon our credit card processors and payment card associations.
Our customers primarily use credit cards to buy from us. We are dependent upon our credit card processors to process the sales transactions and
remit the proceeds to us. The credit card processors have the right to withhold funds otherwise payable to us to establish or increase a reserve based on
their assessment of the inherent risks of credit card processing and their assessment of the risks of
11