Support.com 2011 Annual Report Download - page 14

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Our agreement with Office Depot, which represented 23% of revenue in 2011 and 16% of revenue in the fourth quarter of that year, has a
limited term through March 2012, and provides for a renewal period if agreed to by the parties. This agreement might not be renewed on acceptable
terms or at all. Even if the agreement is renewed, however, it does not require Office Depot to conduct any minimum amount of business with us, and
therefore Office Depot could decide at any time to reduce or eliminate its use of our services. Our services revenue could decline significantly because
of the loss or decline in activity of Office Depot or the delay or loss of a significant program by other channel partners.
In the fourth quarter of 2011, Comcast, OfficeMax and Staples represented 26%, 12% and 11% of our revenues, respectively. The loss of any
of these partners, the worsening of the terms of our arrangements with any of these partners or the failure of any of these partners to achieve their
targets could adversely affect our business. Additionally, we may not obtain new channel partners or customers. The failure to obtain significant new
channel partners or the loss or decline of any significant channel partner would have a material adverse effect on our operating results. Further risks
associated with the loss or decline in a significant channel partner are detailed in “Our failure to establish and expand successful partnerships to sell
our services and products would harm our operating results” below.
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Our current business model requires us to establish and maintain relationships with third parties who market and sell our services and products.
Failure to establish or maintain third-party relationships in our business, particularly with firms that sell our services and products, could materially
and adversely affect the success of our business. We sell to numerous consumers through each of these channel partners, and therefore a delay in the
launch or rollout of our services with even one of these channel partners could cause us to miss revenue or other financial targets. The process of
establishing a relationship with a channel partner can be complex and time consuming, and we must pass multiple levels of review in order to be
selected. If we are unable to establish a sufficient number of new channel partners on a timely basis our sales will suffer. There is also the risk that,
once established, our programs with these channel partners may take longer than we expect to produce revenue or may not produce revenue at all, and
the revenue produced may not be profitable if the costs of performing under the program are greater than anticipated or the program terminates early
before up-front investments can be recouped. One or more of our key channel partners may also choose not to renew their relationship with us,
discontinue selling our services, offer them only on a limited basis or devote insufficient time and attention to promoting them to their customers.
Some of our partners may prefer not to work with us if we also partner with their competitors. If any of these key channel partners merge with a
competitor, all of these risks could be exacerbated. Each of these risks could reduce our sales and significantly harm our operating results.
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Most of our software revenue stream is highly dependent on obtaining advertising placements in a cost-effective manner in certain key online
media placements. From time to time a disruptive trend will impact the online media space, decreasing traffic or significantly increasing the cost of
online advertising and therefore compromising our ability to purchase a desired volume and placement of advertisements at profitable rates. If such a
trend were to occur, as it did in the third quarter of 2011, we may be unable to attract desired amounts of traffic, our costs for advertising may increase
beyond our forecasts and our software revenues may decrease. As a result, our operating results would be negatively impacted.
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Our business depends in part on our ability to attract, manage and retain our Personal Technology Experts and other support personnel. If we
are unable to attract, train and manage in a cost-effective manner adequate numbers of competent Personal Technology Experts and other support
personnel to be available as service volumes vary, particularly as we seek to expand the breadth and flexibility of our staffing model, our service levels
could decline, which could harm our reputation, result in financial losses under contract terms, cause us to lose customers and channel partners, and
otherwise adversely affect our financial performance. Although our service delivery and communications infrastructure enables us to monitor and
manage Personal Technology Experts remotely, because they are typically home-based and geographically dispersed we could experience difficulties
meeting services levels and effectively managing the costs, performance and compliance of these Personal Technology Experts and other support
personnel. Any problems we encounter in effectively attracting, managing and retaining our Personal Technology Experts and other support personnel
could seriously jeopardize our service delivery operations and our financial results.
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