Support.com 2008 Annual Report Download - page 17

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Table of Contents
• The mix of products and services that generate up-front revenue as opposed to revenue over a period of time;
• Our ability to attract and retain customers;
• Our ability to adapt to our customers’ needs in a market space defined by frequent technological change;
• The amount and timing of operating costs and capital expenditures in our business;
• Seasonal trends resulting from corporate spending patterns;
• The exercise of judgment by our management in making accounting decisions in accordance with our accounting policies; and
• Potential losses on investments, foreign exchange exposures on contracts, or other losses from financial instruments we may hold that are exposed to
market risk.
Over the last three years, we have licensed our Enterprise software predominately on a perpetual basis in which we recognize the license revenue up front,
assuming all criteria for revenue recognition have been met. As a result of our current perpetual licensing model for the Enterprise business, we have become
dependent on a few customer contracts with up-front license revenue for a substantial portion of our license revenue in any one quarter. In addition, a significant
portion of our total revenue each quarter comes from a number of orders received in the last month of a quarter. In certain previous quarters, we failed to obtain
or close expected perpetual licenses with up-front revenue resulting in a revenue shortfall. If in future quarters we fail to obtain or close orders expected to be
completed by the end of a quarter, particularly if these orders are for perpetual licenses with up-front revenue, our quarterly results would suffer and the market
price of our common stock would likely decline. While revenues in our Consumer business are generally recognized over the course of a quarter based on the
number of services delivered, this revenue may not be significant enough to offset a shortfall in our Enterprise perpetual license revenue.
Economic instability may harm our operating results and the financial condition of both our Enterprise and Consumer segments.
As has been widely reported, the economies of the United States and foreign countries have been experiencing extreme disruption, including, among other
things, higher mortgage delinquencies, increased unemployment, decreased consumer spending, highly volatile securities markets, diminished liquidity and credit
availability, currency fluctuation, and downgrades and declining valuations of certain investments. These economic developments potentially affect our business
in several ways. Our customers and prospects may be unable to obtain financing for major purchases and operations, they may reduce their spending or delay or
cancel programs that include our offerings and they may be unable to pay us in a timely fashion. Our channel partners, such as retailers, may be unable to invest
in bringing our Consumer services to market. While we monitor these situations carefully and attempt to take appropriate measures to protect ourselves by
recognizing revenue upon collection of accounts from customers we deem to have credit risks and upon sell-through by resellers, it is possible that we may have
to write down or write off doubtful accounts. Such write-downs or write-offs would negatively affect our operating results for the period in which they occur and,
if large enough, could have a material adverse effect on our operating results and financial condition. Our global business, including our investment portfolio,
may be harmed by general decreases in economic activity, including decreases in business and consumer spending and uncertainty due to economic disruptions
and government intervention in the financial markets. We cannot predict the duration and severity of the current disruption in the macroeconomic climate and
market conditions, and these conditions may harm our operating results.
Our Consumer segment will increase our operating expenses without any assurance of yielding increased revenue, and our Consumer offerings may not
achieve market acceptance.
We are executing a plan to extend our Consumer business by providing premium technology services to consumers both through channel partners and
directly. We may not be able to continue to offer these services
14
Source: SUPPORTSOFT INC, 10-K, March 11, 2009