1035748--3/16/2007--CALLIDUS_SOFTWARE

related topics

{system, service, information}

{customer, product, revenue}

{product, market, service}

{personnel, key, retain}

{property, intellectual, protect}

{stock, price, operating}

{control, financial, internal}

{acquisition, growth, future}

{operation, international, foreign}

{stock, price, share}

{product, liability, claim}

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. 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. Our quarterly revenues and operating results are unpredictable and are likely to continue to fluctuate substantially, which may harm our results of operations. 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. 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 from their existing versions to more recent versions of our software. Moreover, we may choose to or be compelled to end-of-life older versions of our software products forcing customers to upgrade their software versions in order to continue receiving maintenance support for our products. If existing customers fail or delay to migrate, our revenues may be harmed. If we do not compete effectively with competitors, our revenues may not grow and could decline. Our maintenance and service revenues produce substantially lower gross margins than our license revenues, and decreases in license revenues relative to service revenues have harmed, and may continue to harm, our overall gross margins. Managing large-scale deployments of our products 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. A substantial majority of our 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 or alter our payment terms 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 have experienced changes in our senior management team from time-to-time. The loss of key personnel or the inability of replacements to quickly and successfully perform in their new roles could adversely affect our business. 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 could subject us to significant liability. 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 on 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 may expand our international operations but we do not have substantial experience in international markets, and may not achieve the expected results. Acquisitions and investments present many risks, and we may not realize the anticipated financial and strategic goals for any such transactions. RISKS RELATED TO OUR STOCK Our stock price is likely to remain volatile.

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1035748--3/16/2007--CALLIDUS_SOFTWARE_INC