WebEx 2002 Annual Report Download - page 22

based employee compensation and the effect of the method used on the reported results. The provisions of SFAS
148 are effective for financial statements for fiscal years ending after December 15, 2002 and interim periods
beginning after December 15, 2002. The adoption of the disclosure requirements of this statement did not impact
our financial position, results of operations or cash flows.
In December 2002, the Emerging Issues Task Force issued a consensus on Issue No. 00-21, “Revenue
Arrangements with Multiple Deliverables” (EITF 00-21). EITF 00-21 mandates how to identify whether goods or
services or both that are to be delivered separately in a bundled sales arrangement should be accounted for as
separate units of accounting. The consensus is effective prospectively for our third quarter of 2003, and we are
currently evaluating the effects of adoption of EITF 00-21 on our service arrangements.
In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of
Variable Interest Entities,” (“FIN 46”). The interpretation provides guidance for determining when a primary
beneficiary should consolidate a variable interest entity, or equivalent structure, that functions to support the
activities of the primary beneficiary. The interpretation is effective as of the beginning of the first interim or
annual reporting period beginning after June 15, 2003 for variable interest entities created before February 1,
2003. The adoption of this statement is not expected to impact our financial position, results of operations or cash
flows.
Factors That May Affect Results
The risks and uncertainties described below are not the only ones we face. If an adverse outcome of any of
the following risks actually occurs, our business, financial condition or results of operations could be materially
and adversely affected.
Although we realized net earnings in 2002, we incurred net losses in 1998, 1999, 2000 and 2001, and there is
no assurance that we will be able to achieve comparable results in the future, and we may experience net
losses in future quarters.
Although we realized net earnings of approximately $16.4 million for the year ended December 31, 2002,
we incurred net losses of approximately $27.6 million for the year ended December 31, 2001 and $80.4 million
for the year ended December 31, 2000, and we may experience net losses in future quarters if the web
communications market softens significantly, or if existing or future competitors reduce our current market share
in the web communications market. If we incur net losses in the future, we may not be able to maintain or
increase the number of our employees, our investment in expanding our services and network, or our sales,
marketing and research and development programs in accordance with our present plans, each of which is critical
to our long-term success. As of December 31, 2002, we had an accumulated deficit of approximately $108.7
million.
Because our quarterly results vary and are difficult to predict, we may fail to meet quarterly financial
expectations, which may cause our stock price to decline.
We commenced operations in February 1995 and our business originally consisted of consulting services. In
early 1998, we licensed an interactive communications product to a small number of customers. We began
offering WebEx Meeting Center in February 1999, our first real-time, interactive multimedia communications
service, and began selling this service to customers and distribution partners. We now offer several web
communications services in addition to Meeting Center, though a few of these services have been launched only
in recent months. Because of our limited operating history of providing services and other factors, our quarterly
revenue and operating results are difficult to predict. In addition, because of the emerging nature of the market
for web communications services, our quarterly revenue and operating results may fluctuate from quarter to
quarter. A number of other factors could cause fluctuations in our operating results.
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