Salesforce.com 2005 Annual Report Download - page 24

Table of Contents
development expenses. Any failure of our service to operate effectively with future network platforms and technologies could reduce the demand for our
service, result in customer dissatisfaction and harm our business.
Any efforts we may make in the future to expand our service beyond the CRM market may not succeed.
To date, we have focused our business on providing on-demand application services for the CRM market, but we may in the future seek to expand into
other markets. In addition, we recently launched the AppExchange directory, an on-line marketplace for on-demand applications running on our on-demand
application service platform. However, any efforts to expand beyond the CRM market may never result in significant revenue growth for us. In addition,
efforts to expand our on-demand application service beyond the CRM market may divert management resources from existing operations and require us to
commit significant financial resources to an unproven business, which may harm our business.
If we acquire any companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value and
adversely affect our operating results and the value of our common stock.
As part of our business strategy, we may acquire or make investments in complementary companies, services and technologies in the future. Through
January 31, 2006, we have not made any acquisitions or investments to date, and therefore our ability as an organization to make acquisitions or investments
is unproven. Acquisitions and investments involve numerous risks, including:
• difficulties in integrating operations, technologies, services and personnel;
• diversion of financial and managerial resources from existing operations;
• risk of entering new markets in which we have little to no experience;
• potential write-offs of acquired assets or investments;
• potential loss of key employees;
• inability to generate sufficient revenue to offset acquisition or investment costs;
• negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed
assets and deferred compensation, and the loss of acquired deferred revenue;
• delays in customer purchases due to uncertainty and the inability to maintain relationships with customers of the acquired businesses; and
• the need to implement controls, procedures and policies appropriate for a public company at companies that prior to the acquisition lacked such
controls, procedures and policies.
In addition, if we finance acquisitions by issuing debt or equity securities, our existing stockholders may be diluted which could affect the market price
of our stock. Further, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be seriously harmed and the
value of our common stock may decline.
If we fail to develop our brand cost-effectively, our business may suffer.
We believe that developing and maintaining awareness of the salesforce.com brand in a cost-effective manner is critical to achieving widespread
acceptance of our existing and future services and is an important element in attracting new customers. Furthermore, we believe that the importance of brand
recognition will increase as competition in our market develops. Successful promotion of our brand will depend largely on the effectiveness of our marketing
efforts and on our ability to provide reliable and useful services at competitive prices. In the past, our efforts to build our brand have involved significant
expense. Brand promotion activities
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