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Table of Contents
a result of the global slowdown affecting businesses generally and due to the completion of payments under a large customer contract that contributed
substantially to revenue in 2008. In order to maintain Segment Operating Profitability on the Enterprise segment, we have sought to align our cost structure with
this environment by reducing costs through a restructuring in the fourth quarter of 2008, as well as in the first quarter of 2009.
Our goals in the Enterprise segment include achieving Segment Operating Profitability and introducing new products to sustain and grow revenue. In order
to achieve Segment Operating Profitability, we are carefully managing the costs in our Enterprise business to make sure our spending is appropriate for the
macroeconomic environment in 2009. As a result, we completed reductions in force in the fourth quarter of 2008 and in the first quarter of 2009. In addition to
reducing headcount, we have reduced facilities expenses by closing certain of our physical offices and moving to a work-from-home model in certain
geographies.
In expanding our product offerings, our new Dynamic Agent will build on the desktop software agent our customers have deployed to more than
50 million users worldwide, and will allow customers to offer content that is targeted and personalized for specific users based on diagnostic information gleaned
from their computers. When combined with new capabilities for presenting marketing offers and downloading digital goods, the Dynamic Agent will allow
customers to use our platform for revenue generation as well as support services. Our RemoteTango product, scheduled for release in late 2009, will be remote
control software delivered in a hosted, SaaS model. Remote control software enables one computer user to control another’s machine; it is used heavily in
technical support and remote infrastructure management. We have had remote control in our product portfolio for some time, but our new product has been
redesigned for SaaS delivery and will be offered on a standalone basis rather than as part of a larger suite of product and service offerings. While we have
invested significant resources in the new Dynamic Agent and RemoteTango offerings, no assurance can be given that they will be introduced successfully, gain
market acceptance or generate material revenue for us.
We intend the following discussion of our financial condition and results of operations to provide information that will assist in understanding our
financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as
well as how certain accounting principles, policies and estimates affect our financial statements.
Critical Accounting Policies and Estimates
In preparing our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States, we make
assumptions, judgments and estimates that can have a significant impact on our net revenue, and operating results, as well as on the value of certain assets and
liabilities on our consolidated balance sheet. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe
to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular
basis we evaluate our assumptions, judgments and estimates and make changes accordingly. We believe that the assumptions, judgments and estimates involved
in the accounting for revenue recognition, allowance for doubtful accounts, business combinations—purchase accounting, fair value estimates, accounting for
income taxes, accounting for goodwill and other intangible assets, and stock-based compensation have the greatest potential impact on our Consolidated
Financial Statements, so we consider these to be our critical accounting policies. We discuss below the critical accounting estimates associated with these
policies. For further information on the critical accounting policies, see Note 1 of our Notes to Consolidated Financial Statements.
Revenue Recognition
In our Consumer segment, revenue is derived primarily from fees for technology support services. These services include those that are delivered on a
one-time basis (“incident-based” services) as well as those that delivered over time (“subscription” services). We provide these services through channel partners
and directly to consumers. Firms that serve as channel partners for us are generally invoiced monthly for services delivered
31
Source: SUPPORTSOFT INC, 10-K, March 11, 2009