1035748--3/12/2009--CALLIDUS_SOFTWARE

related topics

{customer, product, revenue}

{product, market, service}

{system, service, information}

{acquisition, growth, future}

{personnel, key, retain}

{property, intellectual, protect}

{stock, price, operating}

{control, financial, internal}

{loan, real, estate}

{stock, price, share}

{operation, international, foreign}

{product, liability, claim}

If our on-demand offering fails to achieve broad market acceptance, or if we are unable to consistently offer this service on a profitable basis, our operating results could be adversely affected. Our quarterly license revenues remain largely dependent on a relatively small number of license transactions involving sales of our products to new customers, and any delay or failure in closing one or more of these transactions could adversely affect our results of operations. We cannot accurately predict customer subscription and maintenance renewal rates and the impact these renewal rates will have on our future revenues or operating results. Because we recognize revenue from subscriptions for our on-demand service and maintenance support over the terms of the subscription and maintenance support agreements, downturns or upturns in sales may not be immediately reflected in our operating results. Our success depends upon our ability to develop new products and enhance our existing products. Failure to successfully introduce new or enhanced products may adversely affect our operating results. The market for sales performance management software is still new and rapidly evolving and may not develop as we expect. Our quarterly revenues and operating results are unpredictable and are likely to continue to fluctuate substantially, which may harm our results of operations. We might not be able to manage our future growth efficiently or profitably. Our service revenues produce substantially lower gross margins than our license and recurring revenues, and periodic variations in the proportional relationship between services revenues and higher margin license and recurring revenues have harmed, and may continue to harm, our overall gross margins. The loss of key personnel or the inability of replacements to quickly and successfully perform in their new roles could adversely affect our business. Our products have long sales cycles, which makes it difficult to plan our expenses and forecast our results. Professional services comprise a substantial portion of our revenues and, to the extent our customers choose to use other services providers, our revenues and operating results may decline. Deployment of our products frequently requires substantial technical implementation and support by us or third-party service providers. Failure to meet these requirements could cause a decline or delay in recognition of our revenues and an increase in our expenses. Acquisitions and investments present many risks, and we may not realize the anticipated financial and strategic goals for any such transactions. If we are unable to hire and retain qualified employees, including sales, professional services, and engineering personnel, our growth may be impaired. Our latest product features and functionality may require existing customers to migrate to more recent versions of our software. Moreover, we may choose to or be compelled to discontinue maintenance support for older versions of our software products, forcing customers to upgrade their software in order to continue receiving maintenance support. If existing customers fail to migrate or delay migration to newer versions of our software, our revenues may be harmed. If we do not compete effectively, our revenues may not grow and could decline. A substantial majority of our product revenues are derived from our TrueComp software application and related products and services, and a decline in sales of these products and services could adversely affect our operating results and financial condition. If we reduce prices, alter our payment terms or modify our products or services in order to compete successfully, our margins and operating results may be adversely affected. Our products depend on the technology of third parties licensed to us that are necessary for our applications to operate and the loss or inability to maintain these licenses, errors in such software, or discontinuation or updates to such software could result in increased costs or delayed sales of our products. Errors in our products could be costly to correct, adversely affect our reputation and impair our ability to sell our products. Our revenues might be harmed by resistance to adoption of our software by information technology departments. We may lose sales opportunities and our business may be harmed if we do not successfully develop and maintain strategic relationships to implement and sell our products. Breaches of security or failure to safeguard customer data could create the perception that our services are not secure, causing customers to discontinue or reject the use of our services and potentially subject us to significant liability. Implementing, monitoring and maintaining adequate security safeguards may be costly. If we fail to adequately protect our proprietary rights and intellectual property, we may lose valuable assets, experience reduced revenues and incur costly litigation to protect our rights. Our results of operations may be adversely affected if we are subject to a protracted infringement claim or one that results in a significant damage award. Our inclusion of open source software in our products may expose us to liability or require release of our source code. If we do not adequately manage and evolve our financial reporting and managerial systems and processes, our ability to manage and grow our business may be harmed. We expect to continue expanding our international operations but we do not have substantial experience in international markets, and may not achieve the expected results. Our use of third-party international product development and support services may prove difficult to manage or of inadequate quality to allow us to realize our cost reduction goals and produce new products to drive growth. Our investment portfolio may be impaired by further deterioration of the capital markets. RISKS RELATED TO OUR STOCK Our stock price is likely to remain volatile.

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1035748--3/12/2009--CALLIDUS_SOFTWARE_INC