TeleNav 2010 Annual Report Download - page 24

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other providers of LBS for new or popular mobile phones. For this reason or others, some mobile phone
manufacturers may refuse to permit us to access preproduction models of their mobile phones or the mobile
phone manufacturers may offer a competing service. If mobile phone manufacturers do not permit us to
customize our client software and preload it on their devices, we may have difficulty attracting end users because
of poor user experiences or an inconvenient provisioning process. If we are unable to provide seamless
provisioning or end users cancel their subscriptions to our services because they have poor experiences, our
revenue may be harmed.
New entrants and the introduction of other distribution models in the LBS market may harm our competitive
position.
The markets for development, distribution and sale of LBS are rapidly evolving. New entrants seeking to
gain market share by introducing new technology and new products may make it more difficult for us to sell our
LBS, and could create increased pricing pressure, reduced profit margins, increased sales and marketing expenses
or the loss of market share or expected market share, any of which may significantly harm our business,
operating results and financial condition.
Although historically wireless carriers controlled provisioning and access to the applications that could be
used on mobile phones connected to their networks, in recent years consumers have been able to download and
provision applications from individual provider websites and to select from a menu of applications through the
Apple iTunes App Store, the Blackberry App World and other application aggregators. Increased competition
from providers of LBS which do not rely on a wireless carrier may result in fewer wireless carrier subscribers
electing to purchase their wireless carrier’s branded LBS, which could harm our business and revenue. In
addition, these LBS may be offered for free or on a one time fee basis, which could force us to reduce monthly
subscription fees or migrate to a one time fee model to remain competitive. We may also lose end users or face
erosion in ARPU if these competitors deliver their products without charge to the consumer by generating
revenue from advertising or as part of other applications or services. Finally, we may not be successful at
generating revenue from premium navigation services if end users believe that free services are comparable or
adequate.
Our operating income and net income could decline as a percentage of revenue as we make further
expenditures to enhance and expand our operations in order to support additional growth in our business.
As a percentage of revenue, our operating income was 10%, 38% and 40% and our net income was 10%,
27% and 24% in fiscal 2008, 2009 and 2010, respectively. Since June 30, 2008, we have made significant
investments in new operating and information systems and additional data centers, hired substantial numbers of
new research and development, sales and marketing and general and administrative personnel and expanded our
operations outside the United States. Efforts to develop new services and products and attract new wireless
carrier partners require investments in anticipation of longer term revenue. We intend to make additional
investments in systems and personnel and continue to expand our operations to support anticipated growth in our
business. We also expect to incur additional operating costs as a public reporting company as a result of the
closing of our initial public offering, or IPO, on May 18, 2010. As a result of these factors, we believe our
operating income and net income may decline as a percentage of revenue at least through fiscal 2011.
Furthermore, our investments and expenditures may not result in the growth that we anticipate. We also will not
be able to reduce our expenditures on a timely basis, if at all, if we do not generate anticipated revenue.
We are substantially dependent on revenue from our GPS Navigator service, our flagship LBS, and, if we fail
to generate significant revenue from other services, our operating results may be harmed if revenue from GPS
Navigator declines.
Although revenue in absolute dollars from sources other than GPS Navigator rose in all periods presented,
revenue from our GPS Navigator service represented 84%, 92% and 94% of our revenue in fiscal 2008, 2009 and
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