Salesforce.com 2011 Annual Report Download - page 23

If we experience significant fluctuations in our rate of anticipated growth and fail to balance our
expenses with our revenue forecasts, our results could be harmed.
Due to our evolving business model and the unpredictability of future general economic and financial
market conditions, we may not be able to accurately forecast our rate of growth. We plan our expense levels and
investment on estimates of future revenue and future anticipated rate of growth. We may not be able to adjust our
spending quickly enough if the addition of new subscriptions or the renewal rate for existing subscriptions falls
short of our expectations.
As a result, we expect that our revenues, operating results and cash flows may fluctuate significantly on a
quarterly basis. Our recent revenue growth rates may not be sustainable and may decline in the future. We
believe that period-to-period comparisons of our revenues, operating results and cash flows may not be
meaningful and should not be relied upon as an indication of future performance.
We have been and may in the future be sued by third parties for alleged infringement of their proprietary
rights.
The software and Internet industries are characterized by the existence of a large number of patents,
trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of
intellectual property rights. We have received in the past and may receive in the future communications from
third parties claiming that we have infringed the intellectual property rights of others. In addition we have been,
and may in the future be, sued by third parties for alleged infringement of their proprietary rights. Our
technologies may be subject to injunction if they are held to infringe the rights of a third party or we may be
required to pay damages or both.
The outcome of any litigation, regardless of its merits, is inherently uncertain. Any intellectual property
claims and lawsuits could be time-consuming and expensive to resolve, divert management attention from
executing our business plan and require us to change our technology, change our business practices and/or pay
monetary damages or enter into short- or long-term royalty or licensing agreements.
Many of our subscription agreements require us to indemnify our customers for third-party intellectual
property infringement claims, which would increase the cost to us of an adverse ruling on such a claim. Any
adverse determination related to intellectual property claims or litigation could prevent us from offering our
service to others, could be material to our net income or cash flows (or both) or could otherwise adversely affect
our operating results.
Our exposure to risks associated with the use of intellectual property may be increased as a result of
acquisitions, as we have a lower level of visibility into the development process with respect to such technology
or the care taken to safeguard against infringement risks. In addition, third parties may make infringement and
similar or related claims after we have acquired technology that had not been asserted prior to our acquisition.
Our quarterly results can fluctuate and our stock price and the value of your investment could decline
substantially.
Our quarterly operating results are likely to fluctuate. For example, our fourth quarter has historically been
our strongest quarter for new business and renewals. The year-over-year compounding effect of this seasonality
in billing patterns and overall new business and renewal activity causes the value of invoices that we generate in
the fourth quarter to continually increase in proportion to our billings in the other three quarters of our fiscal year.
Additionally, some of the important factors that may cause our revenues, operating results and cash flows to
fluctuate from quarter to quarter include:
• our ability to retain and increase sales to existing customers, attract new customers and satisfy our
customers’ requirements;
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