TeleNav 2011 Annual Report Download - page 25

Table of Contents
Our ability to increase or maintain our end user base and revenue will be impaired if mobile phone manufacturers do not allow us to
customize our services for their new devices.
We typically deliver our services through client software that has been customized to work with a given mobile phone’s operating system,
features and form factors. Wireless carrier customers often insist that mobile phone manufacturers permit us to customize our client software for
their devices in order to provide the end user with a positive experience. Wireless carriers or mobile phone manufacturers may enter into
agreements with 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.
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 38%, 40% and 33% and our net income was 27%, 24% and 20% in fiscal 2009,
2010 and 2011, 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
customers 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. 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 2012. 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 92%, 94% and 88% of our revenue in fiscal 2009, 2010 and 2011, respectively. If we were unable to be the
exclusive provider of white label navigation services to our major wireless carrier customers or the number of end users for GPS Navigator were
to decline, our revenue would be substantially harmed. We have experienced a reduction of ARPU from GPS Navigator over time as our
wireless carrier customers implement white label and more bundled offerings, for which we typically receive a lower monthly subscription fee or
a fixed annual fee regardless of the number of end users (subject to specified thresholds) to which we provide our services. We may be unable to
increase our revenue from our enterprise LBS, automotive navigation, mobile advertising and commerce and premium LBS. If we were unable
to offset declining ARPU from GPS Navigator by increasing the amount of revenue that our other services and products represent, our business,
operating results and financial condition would be harmed.
We rely on our wireless carrier customers for timely and accurate subscriber information. A failure or disruption in the provisioning of this
data to us would materially and adversely affect our ability to manage our business effectively.
We rely on our wireless carrier customers to bill subscribers and collect monthly fees for our LBS, either directly or through third party
service providers. If our wireless carrier customers or their third party service providers provide us with inaccurate data or experience errors or
outages in their own billing and provisioning
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