WebEx 2002 Annual Report Download - page 29

We may engage in future acquisitions or investments that could dilute the ownership of our existing
stockholders, cause us to incur significant expenses or harm our operating results.
We may acquire or invest in complementary businesses, technologies or services. As of December 31, 2002,
we had no specific agreements, commitments or discussions with respect to any acquisitions or investments,
other than our discussions concerning the acquisition by WebEx China of substantially all of the assets of three
companies in China owned by our President and Chief Technical Officer, Min Zhu and his spouse, which asset
purchase took place in February 2003. Integrating any newly acquired businesses, technologies or services may
be expensive and time-consuming. To finance any acquisitions, it may be necessary for us to raise additional
funds through public or private financings. Additional funds may not be available on terms that are favorable to
us and, in the case of equity financings, may result in dilution to our stockholders. We may be unable to complete
any acquisitions or investments on commercially reasonable terms, if at all. Even if completed, we may be unable
to operate any acquired businesses profitably or successfully integrate the employees, technology, products or
services of any acquired businesses into our existing business. If we are unable to integrate any newly acquired
entities or technologies effectively, our operating results could suffer. Future acquisitions by us could also result
in large and immediate write-downs, or incurrence of debt and contingent liabilities, any of which would harm
our operating results.
We must compete successfully in the web communications services market.
The market for web communications services is intensely competitive, subject to rapid change and is
significantly affected by new product and service introductions and other market activities of industry
participants. Although we do not currently compete against any one entity with respect to all aspects of our
services, we do compete with various companies in regards to specific elements of our web communications
services. For example, we compete with providers of traditional communications technologies such as
teleconferencing and videoconferencing, applications software and tools companies, and web conferencing
services, such as Centra Software, Genesys, Raindance, IBM/Lotus (SameTime), Microsoft (NetMeeting), Oracle
(i-meeting) and Placeware. In January 2003 Microsoft announced that it had signed an agreement to acquire
Placeware. Other companies could choose to extend their products and services to include interactive
communications in the future. Many of our current and potential competitors have longer operating histories,
significantly greater financial, technical and other resources and greater name recognition than we do. Our
current and future competitors maybe able to respond more quickly to new or emerging technologies and changes
in customer requirements. In addition, current and potential competitors have established, and may in the future
establish, cooperative relationships with third parties and with each other to increase the availability of their
products and services to the marketplace. Competitive pressures could reduce our market share or require us to
reduce the price of our services, either of which could harm our business and operating results.
Microsoft may become a formidable competitor in the web communications market, which may be enhanced by
its announced intention to acquire Placeware.
In January 2003, Microsoft announced that it had signed an agreement to acquire our competitor Placeware.
If the acquisition is completed, Microsoft could become a far more active and significant competitor in the
specific interactive communications markets that we currently serve. Microsoft’s announced intention to acquire
Placeware could mean Microsoft will devote greater resources to the web communications market than it has in
the past. If Microsoft ultimately acquires Placeware, Microsoft could invest a significant amount of financial and
technical resources in improving the Placeware web conferencing offering or Microsoft’s own NetMeeting
offering, or Microsoft could develop entirely new web communications technologies. Additionally, Microsoft
could vastly increase the marketing resources devoted to the Placeware’s web conferencing offerings,
Microsoft’s own NetMeeting or other web communications technologies Microsoft may be developing. In
addition, Microsoft could seek to leverage its dominant market position in the operating system, productivity
application or browser market to expand its presence in the web communications market, which may make it
difficult for other vendors, such as WebEx, to compete. While we believe that our current market leadership over
Placeware and NetMeeting in web conferencing is in part due to the technologies and strategies we have
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