1095600--7/13/2007--BLUE_COAT_SYSTEMS

related topics

{product, market, service}

{customer, product, revenue}

{stock, price, operating}

{financial, litigation, operation}

{property, intellectual, protect}

{control, financial, internal}

{acquisition, growth, future}

{operation, international, foreign}

{tax, income, asset}

{regulation, change, law}

{operation, natural, condition}

{system, service, information}

{product, liability, claim}

{personnel, key, retain}

FACTORS AFFECTING FUTURE OPERATING RESULTS Our quarterly operating results fluctuate significantly and our ability to forecast our quarterly operating results is limited, so our operating results may not meet our guidance or third party expectations. We must anticipate market needs, and develop and introduce new products and enhance existing products to rapidly meet those needs, or we will lose market share and our operating results will be adversely affected. Our internal investments in research and development may not yield the anticipated benefits. Unless we develop better market awareness of our company and our product our net revenue will not grow as anticipated. If the market for WAN Application Delivery products does not develop as we anticipate, we may not be able to achieve an acceptable increase of our net revenue, and the price of our stock may decline. The WAN Applications Delivery market is intensely competitive and certain of our competitors have greater financial, technical, sales and marketing resources and may take actions that could weaken our competitive position or reduce our net revenue. We have a history of losses and profitability could be difficult to sustain. We must attract, assimilate and retain key personnel on a cost-effective basis, or our ability to execute our business strategy and generate sales could be harmed. We significantly rely on third party sales channel partners to sell our products. 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 income period to period. We are dependent on contract manufacturers to manufacture our products, and changes to those relationships, expected or unexpected, may result in delays or disruptions that could cause us to lose revenue and damage our customer relationships. If we fail to accurately predict our manufacturing requirements and manage our supply chain we could incur additional costs or experience manufacturing delays that could harm our business. We depend on single and, in some cases, sole and limited source suppliers for several key components, which makes us susceptible to shortages, unavailability or price fluctuations. Our gross margin is affected by a number of factors, and may be below our expectations or the expectations of investors and analysts, which could cause a decline in our stock price. Our international operations expose us to risks. The matters relating to our historical stock granting practices and the restatement of our consolidated financial statements in March 2007 have required us to incur substantial expenses, have resulted in litigation and regulatory inquiries, and may result in additional litigation, regulatory proceedings and governmental enforcement actions. Our acquisitions may not provide the anticipated benefits and may disrupt our existing business. We may not be able to successfully manage the growth of our business if we are unable to improve our internal systems, processes and controls. Our products protect Web-based applications and content, and are focused on the Internet gateway as the point of entry into the network. Our target customers may not wish to purchase our appliances without protection for non-Web based applications and content or may not use the Internet gateway as a principal point of network entry. We rely on technology that we license from third parties, including software that is integrated with internally developed software and used with our products. 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, reduce our sales or result in litigation. We are the target of various 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. Third parties could assert that our products infringe their intellectual property rights. The market price of our stock is volatile, and is likely to be volatile in the future. Our business is subject to increasingly complex corporate governance, public disclosure, accounting, and tax requirements that have increased both our costs and the risk of noncompliance. We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets. Our operations could be significantly hindered by the occurrence of a natural disaster, terrorist attack or other catastrophic event. The legal environment in which we operate is uncertain and claims against us could cause our business to suffer. We have incurred and may continue to incur, in future periods, significant stock-based compensation charges under SFAS No. 123(R), which may adversely affect our reported financial results.

Full 10-K form ▸

1095600--7/13/2007--BLUE_COAT_SYSTEMS_INC