Stamps.com 2002 Annual Report Download - page 17

Table of Contents
System and online security failures could harm our business and operating results.
Our services depend on the efficient and uninterrupted operation of our computer and communications hardware systems. In addition, we must
provide a high level of security for the transactions we execute. We rely on internally-developed and third-party technology to provide secure
transmission of postage and other confidential information. Any breach of these security measures would severely impact our business and
reputation and would likely result in the loss of customers. Furthermore, if we are unable to provide adequate security, the US Postal Service
could prohibit us from selling postage over the Internet.
Our systems and operations are vulnerable to damage or interruption from a number of sources, including fire, flood, power loss,
telecommunications failure, break-ins, earthquakes and similar events. Our Internet host provider does not guarantee that our Internet access
will be uninterrupted, error-free or secure. Our servers are also vulnerable to computer viruses, physical, electrical or electronic break-ins and
similar disruptions. We have experienced minor system interruptions in the past and may experience them again in the future. Any substantial
interruptions in the future could result in the loss of data and could completely impair our ability to generate revenues from our service. We do
not presently have a full disaster recovery plan in effect to cover the loss of facilities and equipment. In addition, we do not have a fail-over site
that mirrors our infrastructure to allow us to operate from a second location. We have business interruption insurance; however, we cannot be
certain that our coverage will be sufficient to compensate us for losses that may occur as a result of business interruptions.
A significant barrier to electronic commerce and communications is the secure transmission of confidential information over public networks.
Anyone who is able to circumvent our security measures could misappropriate confidential information or cause interruptions in our operations.
We may be required to expend significant capital and other resources to protect against potential security breaches or to alleviate problems
caused by any breach. We rely on specialized technology from within our own infrastructure to provide the security necessary for secure
transmission of postage and other confidential information. Advances in computer capabilities, new discoveries in security technology, or other
events or developments may result in a compromise or breach of the algorithms we use to protect customer transaction data. Should someone
circumvent our security measures, our reputation, business, financial condition and results of operations could be seriously harmed. Security
breaches could also expose us to a risk of loss or litigation and possible liability for failing to secure confidential customer information. As a
result, we may be required to expend a significant amount of financial and other resources to protect against security breaches or to alleviate
any problems that they may cause.
Risks Related to Our Industry
US Postal Service regulations and fee assessments may cause disruptions or discontinuance of our business, may increase the cost of
our service and may affect the adoption of Internet Postage as a new method of mailing.
We are subject to continued US Postal Service scrutiny and other government regulations. The continued availability of our Internet Postage
services is dependent upon our service continuing to meet US Postal Service performance specifications and regulations. The US Postal Service
could change its certification requirements or specifications for Internet Postage or revoke the approval of our service at any time. If at any time
our Internet Postage service fails to meet US Postal Service requirements, we may be prohibited from offering this service and our business
would be severely and negatively impacted. In addition, the US Postal Service could suspend, terminate or offer services which compete against
Internet Postage, any of which could stop or negatively impact the commercial adoption of our Internet Postage services. Any changes in
requirements or specifications for Internet Postage could adversely affect our pricing, cost of revenues, operating results and margins by
increasing the cost of providing our Internet Postage service.
The US Postal Service could also decide that Internet Postage should no longer be an approved postage service due to security concerns or
other issues. Our business would suffer dramatically if we are unable to adapt
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2003. EDGAR Online, Inc.