1042134--2/9/2007--CHORDIANT_SOFTWARE

related topics

{product, market, service}

{system, service, information}

{customer, product, revenue}

{control, financial, internal}

{operation, international, foreign}

{property, intellectual, protect}

{stock, price, operating}

{acquisition, growth, future}

{financial, litigation, operation}

{stock, price, share}

{personnel, key, retain}

{product, liability, claim}

{cost, contract, operation}

{interest, director, officer}

{regulation, change, law}

{cost, operation, labor}

The matters relating to the Audit Committee of the Board s review of our historical stock option granting practices and the restatement of our consolidated financial statements have required us to incur substantial expenses, have resulted in litigation, and may result in additional litigation and future government enforcement actions. We may be subject to further investigation by the SEC or litigation by private parties in connection with the restatement of our interim financial statements for the fiscal quarters ended March 31, 2004, June 30, 2004, September 30, 2004, December 31, 2004, March 31, 2005, June 30, 2005, December 31, 2005, and March 31, 2006 and the fiscal years ended 2001, 2002, 2003, 2005 and nine months ended September 30, 2004. Historically, we have not been profitable and we may continue to incur losses, which may raise vendor viability concerns thereby making it more difficult to close license transactions with new and existing customers. Because a small number of customers account for a substantial portion of our revenues, the loss of a significant customer could cause a substantial decline in our revenues. If we fail to adequately address the difficulties of managing our international operations, our revenues and operating expenses will be adversely affected. Our known backlog of business may not result in revenue. Fluctuations in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in international markets and could negatively affect our operating results and cash flows. Geopolitical concerns could make the closing of license transactions with new and existing customers difficult. Competition in our markets is intense and could reduce our sales and prevent us from achieving profitability. We may experience a shortfall in revenue, earnings, cash flow or otherwise fail to meet public market expectations, which could materially and adversely affect our business and the market price of our common stock. If our stockholders approve our proposed reverse stock split, our stock price may be adversely affected. Our operating results and cash flows fluctuate significantly and delays in delivery or implementation of our products or changes in the payment terms with customers may cause unanticipated declines in revenues or cash flow, which could disappoint investors and result in a decline in our stock price. If we fail to maintain and expand our relationships with systems integrators and other business partners, our ability to develop, market, sell, and support our products may be adversely affected. If systems integrators fail to properly implement our software, our business, reputation and financial results may be harmed. Our primary products have a long sales and implementation cycle, which makes it difficult to predict our quarterly results and may cause our operating results to vary significantly. If we do not improve our internal control over financial reporting, investors could lose confidence in our financial reporting and customers may delay purchasing decisions, which would harm our business and the market price of our common stock. If we are not able to successfully manage our partner operations in India, our operations and financial results may be adversely affected. We have incurred and may continue to incur, in future periods, significant stock-based compensation charges related to certain stock options and stock awards, which may adversely affect our reported financial results. If our products do not operate effectively in a company-wide environment, we may lose sales and suffer decreased revenues. Defects in our products could diminish demand for our products and result in decreased revenues, decreased market acceptance and injury to our reputation. Because competition for qualified personnel is intense, we may not be able to retain or recruit personnel, which could impact the development and sales of our products. To date, our sales have been concentrated in the financial services, telecommunications and retail markets, and if we are unable to continue sales in these markets or successfully penetrate new markets, our revenues may decline. Low gross margin in services revenues could adversely impact our overall gross margin and income. We may not have the workforce necessary to support our platform of products if demand for our products substantially increased, and, if we need to rebuild our workforce in the future, we may not be able to recruit personnel in a timely manner, which could negatively impact the development and sales of our products. If we fail to introduce new versions and releases of functional and scalable products in a timely manner, customers may license competing products and our revenues may decline. We depend on technology licensed to us by third parties, and the loss or inability to maintain these licenses could prevent or delay sales of our products. Defects in third party products associated with our products could impair our products functionality and injure our reputation. Our customers and systems integration partners may have the ability to alter our source code and resulting inappropriate alterations could adversely affect the performance of our products, cause injury to our reputation and increase operating expenses. If our products do not operate with the hardware and software platforms used by our customers, our customers may license competing products and our revenues will decline. Our failure to successfully integrate with future acquired or merged companies and technologies could prevent us from operating efficiently. If we become subject to intellectual property infringement claims, including patent infringement claims, these claims could be costly and time-consuming to defend, divert management s attention, cause product delays and have an adverse effect on our revenues and net income. The application of percentage of completion and completed contract accounting to our business is complex and may result in delays in the reporting of our financial results and revenue not being recognized as we expect. Changes in our revenue recognition model could result in short term declines to revenue. We may continue to encounter unexpected delays in implementing the requirements relating to internal control over financial reporting and we expect to incur additional expenses and diversion of management s time as a result of performing future system and process evaluation, testing and remediation required to comply with future management assessment and auditor attestation requirements.

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1042134--2/9/2007--CHORDIANT_SOFTWARE_INC