1086195--3/16/2006--ART_TECHNOLOGY_GROUP

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{system, service, information}

{stock, price, share}

{stock, price, operating}

{acquisition, growth, future}

{cost, operation, labor}

{regulation, government, change}

{property, intellectual, protect}

{regulation, change, law}

{product, liability, claim}

{debt, indebtedness, cash}

{financial, litigation, operation}

{control, financial, internal}

{provision, law, control}

{personnel, key, retain}

If the market for our Hosting solutions does not develop or develops more slowly than we expect, our business could be negatively affected. Interruptions, delays or failures in our hosting services due to systems error or other causes, could adversely affect our business and subject us to liability. Our product license revenue may not continue to grow at the rate it did in 2005 if our implementation of subscription-based OnDemand hosting services shifts more product license revenue than anticipated to the subscription service model. We could incur substantial costs defending against a claim of infringement or protecting our intellectual property from infringement. We may not be able to sustain or increase our revenue or attain profitability on a quarterly or annual basis which could lead to a material decrease in the price of our common stock. Turnover in our personnel may impair our ability to develop and implement a business strategy, which could have a material adverse effect on our operating results and common stock price. Our lengthy sales cycle makes it difficult to predict our quarterly results and causes variability in our operating results. We face intense competition in the market for Internet online marketing, sales and service applications, and we expect competition to intensify in the future. This competition could cause our revenues to fall short of expectations, which could adversely affect our future operating results and our ability to grow our business. If we fail to maintain our existing customer base, our ability to generate revenues will be harmed. If we fail to address the challenges associated with international operations, revenues from our products and services may decline or the costs of providing our products or services may increase. Failure by us to comply with the financial covenants in our line of credit or the refusal of our bank to renew this facility, could negatively impact our cash, cash equivalents and marketable securities balances. If systems integrators or value added resellers reduce their support and implementation of our products, our revenues may fail to meet expectations and our operating results would suffer. Competition with our resellers could limit our sales opportunities and jeopardize these relationships. If we acquire other companies or businesses, we will be subject to risks that could hurt our business. We may need additional financing in the future, and any additional financing may result in restrictions on our operations or substantial dilution to our stockholders. If we fail to adapt to rapid changes in the market for Internet online marketing, sales, and service applications, our existing products could become obsolete. Our software products may contain errors or defects that could result in lost revenues, delayed or limited market acceptance, or product liability claims with substantial litigation costs. Our software offerings under our agreements with IBM and JBoss may not achieve market acceptance, which may harm our business and operating results. Our announced restructurings may not result in the reduced cost structure we anticipate and may have other adverse impacts on productivity. The loss of technology licensed from third parties could delay our ability to deliver our products. We use the Java programming language to develop our products, and our business could be harmed if Java loses market acceptance or if we are not able to continue using Java or Java-related technologies. Risks Related To the Internet Industry Our performance will depend on the growth of e-commerce and self-service. Regulations could be enacted that either directly restrict our business or indirectly affect our business by limiting the growth of e-commerce. The Internet is generating privacy concerns that could result in legislation or market perceptions that could harm our business or result in reduced sales of our products, or both. Risks Related to the Securities Markets and Our Stock Our common stock price may continue to be volatile. We may incur significant costs from class action litigation. Our common stock may not continue to trade on the Nasdaq National Market, which could reduce the value of your investment and make your shares more difficult to sell. Anti-takeover provisions in our charter documents and Delaware law could prevent or delay a change in control of our company. The regulatory environment surrounding accounting and corporate governance subjects us to certain legal uncertainties in the operation of our business and may increase the cost of doing business.

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1086195--3/16/2006--ART_TECHNOLOGY_GROUP_INC