1095600--3/28/2007--BLUE_COAT_SYSTEMS

related topics

{product, market, service}

{stock, price, operating}

{customer, product, revenue}

{financial, litigation, operation}

{control, financial, internal}

{regulation, change, law}

{acquisition, growth, future}

{product, liability, claim}

{property, intellectual, protect}

{operation, international, foreign}

{operation, natural, condition}

{competitive, industry, competition}

{tax, income, asset}

{system, service, information}

{personnel, key, retain}

FACTORS AFFECTING FUTURE OPERATING RESULTS The matters relating to the investigation by the Special Committee of the Board of Directors and the restatement of our consolidated financial statements may result in additional litigation and governmental enforcement actions. Our ability to forecast our quarterly operating results is limited, and if our quarterly operating results are below the expectations of analysts or investors, the market price of our common stock will likely decline. If we fail to create additional sales through our sales channel partners, our business will be seriously harmed. If we are unable to establish fair value for any undelivered element of a customer order, revenue relating to the entire order will be deferred until the revenue recognition criteria for all elements of the customer order are met. This could lower our net revenue in one period and increase it in future periods resulting in greater variability in net revenue and earnings period to period. Because we depend on several third-party manufacturers to build our products, we are susceptible to manufacturing delays and sudden price increases, which could prevent us from shipping customer orders on time, if at all, and may result in the loss of sales and customers. Because some of the key components in our products come from limited sources of supply, we are susceptible to supply shortages or supply changes, which could disrupt or delay our scheduled product deliveries to our customers and may result in the loss of sales and customers. We must maintain a competitive position in the proxy appliance market by developing and introducing new products while enhancing existing products to match the needs of our customers or we will lose market share and our operating results will be adversely affected. Our business will not grow unless we can continue to extend our product offerings through the introduction of new products and enhancements that accurately predict the needs of our target market. The market for proxy appliance solutions is relatively new, unknown and evolving, and subject to rapid technological changes. If this market does not develop as we anticipate, our sales may not grow and may decline. We need to continue to develop market awareness of our company and our products. Our sales may not grow because our proxy appliances only protect Web-based applications and content, and our target customers may not wish to purchase our network security device without protection for non-Web based applications and content. Any failure of this product to satisfy customer demands could harm our business. Some of our competitors have greater financial, technical, sales, marketing and other resources than we do. In addition, acquisitions of or other strategic transactions by our competitors could weaken our competitive position or reduce our revenue. We have been informed of SEC and other investigations, which could result in substantial costs and divert management attention and resources. Our gross margin percentage may be below our expectations or the expectations of investors and analysts due to a variety of factors, which would adversely affect our operating results and could result in a decline in the market price of our common stock. We have a history of losses and profitability could be difficult to sustain. We rely on technology that we license from third parties, including software that is integrated with internally developed software and used in our products to perform key functions. We may not be able to continue to generate a significant level of sales from the international markets in which we currently operate. Unpredictable macroeconomic conditions could adversely impact our existing and potential customers ability and willingness to purchase our products, which would cause a decline in our sales. Our variable sales cycle makes it difficult to predict the timing of a sale or whether a sale will be made, which makes our quarterly operating results less predictable. We are subject to evolving and expensive corporate governance regulations and requirements. Our failure to adequately adhere to these requirements or the failure or circumvention of our controls and procedures could seriously harm our business. We had a material weakness in internal control over financial reporting and cannot assure you that additional material weaknesses will not be identified in the future. If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in our financial statements that could require a restatement or our filings may not be timely and investors may lose confidence in our reported financial information, which could lead to a decline in our stock price. Undetected product errors, or failures found in new products may result in a loss of or delay in market acceptance of our products, which could cause us to incur significant costs and reduce our sales. We develop products in the United States and sell them throughout the world. As a result, changes in foreign currency exchange rates and/or weak economic conditions in foreign markets could negatively impact our financial results. We are dependent upon key personnel and we must attract, assimilate and retain other highly qualified personnel or our ability to execute our business strategy and generate sales could be harmed. We are the target of a Class Action Lawsuit and Derivative Litigation and regulatory proceedings, which could result in substantial costs, divert management attention and resources, and have a material adverse effect on our results of operations or financial position. If the protection of our proprietary technology is inadequate, our competitors may gain access to our technology, and our market share could decline. If we are unable to raise additional capital, our business could be harmed. The legal environment in which we operate is uncertain and claims against us could cause our business to suffer. Potential new accounting pronouncements may impact our future financial position or results of operations. We may make acquisitions in the future, which could affect our operations. We could be subject to product liability claims, which are time-consuming and costly to defend. Our operations could be significantly hindered by the occurrence of a natural disaster, terrorist attack or other catastrophic event. Our stock price is volatile and, as a result, you may have difficulty evaluating the value of our stock, and the market price of our stock may decline.

Full 10-K form ▸

1095600--3/28/2007--BLUE_COAT_SYSTEMS_INC