Support.com 2008 Annual Report Download - page 24

Table of Contents
the expiration date of the offer and released UBS from any claims relating to the marketing and sale of ARS. Prior to any sale of our ARS, ARS will continue to
accrue and pay interest as determined by the auction process or the terms specified in the prospectus of the ARS if the auction process fails. UBS’s obligations
under the offer are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the offer. UBS has
disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the offer. If UBS has insufficient funding to buy back the
ARS and the auction process continues to fail, then we may incur further losses on the carrying value of the ARS.
The remaining ARS was issued by another investment advisor who has not made an offer similar to UBS. Accordingly, we have continued to classify the
ARS issued by this adviser as available-for-sale securities. Changes in their market value during the year ended December 31, 2008 have been recorded through
other comprehensive income as a $1.6 million loss. If market conditions deteriorate further, we may be required to record additional unrealized losses in other
comprehensive income or as impairment charges. We will not be able to liquidate these investments unless the issuer calls the security, a successful auction
occurs, a buyer is found outside of the auction process, or the security matures.
We have recorded long-lived assets, and our results of operations would be adversely affected if their value becomes impaired.
Goodwill and identifiable intangible assets were recorded in part due to our acquisition of substantially all of the assets of Core Networks Incorporated in
September 2004 and our acquisition of YourTechOnline.com in May 2008. We also have certain intangible assets with indefinite lives. We assess the impairment
of goodwill and indefinite lived intangible assets annually or more often if events or changes in circumstances indicate that the carrying value may not be
recoverable. We assess the impairment of acquired product rights and other finite lived intangible assets whenever events or changes in circumstances indicate
that its carrying amount may not be recoverable. As a result of our discontinuance of active marketing and selling of one of the products we acquired from Core
Networks, and a reevaluation of the fair value of the Core Network’s technology intangible assets, we recognized a non-cash write-down of approximately
$1.7 million during the fourth quarter of 2007. An impairment loss was recognized because the sum of the discounted future net cash flows expected to result
from the use of the assets and their eventual disposition was less than the carrying amounts. Such impairment loss was measured as the difference between the
carrying amounts of the assets and their fair value. Furthermore, we evaluate cash flows at the lowest operating level. If the number of reporting segments
increases in the future, as it has in 2008, this may make impairment more probable than it would be with fewer reporting segments. As was the case in the fourth
quarter of 2007, future write-downs of goodwill or net long-lived and intangible assets, would cause our operating results to suffer.
Management changes and reorganization efforts may strain our administrative, technical, operational and financial infrastructure and disrupt our
business.
Our success depends on the skills, experience, performance, and focus of our senior management, engineering, sales, marketing and other key personnel.
In January 2008, we reorganized the company and began operating our business in two segments, Consumer and Enterprise. We also appointed senior
management personnel to lead each of the business segments. We made this change in an effort to ensure that each part of our business is focused, accountable
and transparent at the segment level. In connection with this change we made several management and organizational changes. Our success will depend to a
significant extent on the ability of our executives and key employees to function effectively in their new roles and to work together successfully. If these
executives and key employees do not function and work together successfully, or if we lose the services of one or more of our executives or key employees, our
business could be harmed.
We are also focused on increasing our operating margins and improving our operating efficiencies. To this end, we reduced our workforce in the fourth
quarter of 2008 and again in the first quarter of 2009. All of these changes place a strain on our management, and our administrative, technical, operational and
financial
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Source: SUPPORTSOFT INC, 10-K, March 11, 2009