TiVo 2009 Annual Report Download - page 38

Table of Contents
Our ability to provide uninterrupted service and high quality customer support depends on the efficient and uninterrupted operation of our computer and
communications systems. Our computer hardware and other operating systems for the TiVo service are vulnerable to damage or interruption from
earthquakes, floods, fires, power loss, telecommunication failures, and similar events. They are also subject to break-ins, sabotage, intentional acts of
vandalism, and similar misconduct. These types of interruptions in the TiVo service may reduce our revenues and profits. We currently house the server
hardware that delivers the TiVo service at only one location and continue to explore the benefits of establishing a backup facility. Our business also will be
harmed if consumers believe our service is unreliable. In addition to placing increased burdens on our engineering staff, service outages will create a flood of
customer questions and complaints that must be responded to by our customer support personnel. Any frequent or persistent system failures could irreparably
damage our reputation and brand and possibly trigger requests for refunds on subscription fees and hardware purchases and possible consumer litigation.
We have detected in the past and may continue to detect errors and product defects in the future. These problems can affect system uptime and result in
significant warranty and repair problems, which could cause customer service and customer relations problems. Correcting errors in our software or fixing
defects in our products requires significant time and resources, which could delay product releases and affect market acceptance of the TiVo service. Any
delivery by us of products or upgrades with undetected material product defects or software errors could harm our credibility and market acceptance of the
DVRs and the TiVo service. In addition, defective products could cause a risk of injury that may subject us to litigation or cause us to have to undertake a
product recall. For example, we previously became aware of occasions where a part came loose from the remote control device that comes with the DVRs that
enable the TiVo service, including occurrences where a young child gagged on or ingested a part of the remote control device. While we are unaware of any
injuries resulting from the use of our products, we may be subject to products liability litigation in the future. Additionally, if we are required to repair or
replace any of our products, we could incur significant costs, which would have a negative impact on our financial condition and results of operations.
If we lose senior management or other key engineering personnel or are unable to replace or recruit key management and engineering
personnel, we may not be able to successfully operate our business.
Our future performance and growth will be substantially dependent on the continued services of our senior management and other key engineering
personnel as well our ability to replace departed personnel and ability to recruit key management and engineering personnel in the future. The loss of any
members of our senior management team or other key engineering personnel and our inability to hire additional senior management or other key engineering
personnel could harm our business and results of operations. Competition to recruit and retain key management, engineering and other personnel in Silicon
Valley is highly competitive. In addition, we do not have key man insurance policies for any of our key personnel which may adversely affect our ability to
replace members of senior management.
Our Certificate of Incorporation, Bylaws, Rights Agreement and Delaware law could discourage a third-party from acquiring us and
consequently decrease the market value of our common stock.
In the future, we could become the subject of an unsolicited attempted takeover of our Company. Although an unsolicited takeover could be in the best
interests of our stockholders, certain provisions of Delaware law, our organizational documents and our Rights Agreement could be impediments to such a
takeover.
We are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, the statute prohibits a
publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Our Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws also require that any action required or permitted to be taken by our stockholders
must be effected at a duly called annual or special meeting of the stockholders and may not be effected by a consent in writing. In addition, special meetings
of our stockholders may be called only by a majority of the total number of authorized directors, the chairman of the board, our chief executive officer or the
holders of 50% or more of our common stock. Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws also provide that
directors may be removed only for cause by a vote of a majority of the stockholders and that vacancies on the Board of Directors created either by resignation,
death, disqualification, removal or by an increase in the size of the Board of Directors may be filled by a majority of the directors in office, although less than
a quorum. Our Amended and Restated Certificate of Incorporation also provides for a classified Board of Directors and specifies that the authorized number
of directors may be changed only by resolution of the Board of Directors.
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