1096958--3/31/2006--OPENTV

related topics

{product, market, service}

{stock, price, operating}

{property, intellectual, protect}

{regulation, change, law}

{system, service, information}

{customer, product, revenue}

{regulation, government, change}

{operation, international, foreign}

{product, candidate, development}

{personnel, key, retain}

{investment, property, distribution}

{cost, operation, labor}

{stock, price, share}

{control, financial, internal}

{acquisition, growth, future}

We have historically derived a significant percentage of our revenues from licensing our middleware to network operators. Our opportunities for future revenue growth with middleware are limited by the actual number of worldwide network operators and by technology decisions they make from time to time. We offer volume discounts to certain customers, which may, over time, depress our average pricing. While deployments of our software may continue to grow, those discounts, as they are triggered, may limit the rate of our royalty growth in the future. We expect a more significant portion of our revenue growth in the future to be derived from interactive applications that we develop and market. If we are not successful in developing and marketing interactive applications, our future revenue growth may be limited. Two of our potential North American cable customers, Cox Communications and Comcast Corporation, joined together in early 2005 to acquire certain assets from Liberate Technologies, one of our direct competitors in the middleware business. That acquisition, which closed in April 2005, is likely to eliminate Cox and Comcast as potential customers for our middleware, which could adversely affect our ability to grow. A significant percentage of our revenues are currently provided by entities affiliated with The News Corporation, which also controls companies that compete with us in certain market segments. Those circumstances may make it more difficult for us, over the long-term, to sell products, technologies or services to News Corporation affiliates in market segments in which other News Corporation affiliates offer competing products. We have concluded that our internal control over financial reporting and disclosure controls were not effective as of December 31, 2005. If we do not properly address identified weaknesses and implement additional controls to remedy those weaknesses, the reliability of our financial statements could be implicated and, ultimately, our financial results and our stock price could suffer. We may be unable in the future to raise additional capital required to support our operating activities. We realize a percentage of our revenue from revenue sharing and subscription-based arrangements, especially in our applications business. We are not certain that those revenue models will be generally acceptable to our customers over the long-term or that they will offer us significant opportunities for revenue growth, which could adversely affect the growth opportunities for our applications business. The market for our products and services is subject to significant competition, which could adversely affect our business. The trend of consolidation among industry participants may adversely impact our business, results of operations and future prospects. Unanticipated fluctuations in our quarterly operating results could affect our stock price. We depend upon key personnel, including our senior executives and technical and engineering staff, to operate our business effectively, and we may be unable to attract or retain such personnel. We continue to evaluate our business operations and may implement structural and other changes that affect the conduct of our worldwide business operations. As we continue to align our resources appropriately with our evolving business, we may face unintended consequences or suffer adverse effects on our operations or personnel. Interactive television remains an emerging business and it may not attract widespread market acceptance or demand. Because much of our success and value lie in our ownership and use of our intellectual property, our failure to protect our intellectual property and develop new proprietary technology may negatively affect us. Intellectual property infringement claims may be asserted against us, which could have the effect of disrupting our business. We grant certain indemnification rights to our customers when we license our software technologies. We may, therefore, become subject to third party infringement claims through those commercial arrangements. In addition, the damages to which we are subject may be increased by the use of our technologies in our customers products. The adoption of industry-wide standards for interactive television, such as the OpenCable initiative in North America, could adversely affect our ability to sell our products and services or place downward pressure on our pricing. Our failure to participate in certain industry standards setting organizations, including CableLabs, may adversely affect our ability to sell products or services to network operators or other potential customers that are members of those organizations The adoption of incompatible standards by our industry and rapid technological advances could render our products and services obsolete or non-competitive. Government regulations may adversely affect our business. Changes to current accounting policies or in how such policies are interpreted or applied to our business could have a significant effect on our reported financial results or the way in which we conduct our business and could make it difficult for investors to assess properly our financial condition or operating results. Through the use of our technology, we have the ability to collect personal and confidential information from set-top boxes. If we fail to protect this information from security breaches or misuse this information, then our operations could be disrupted and we could be subject to litigation and liability under privacy laws. If we continue to develop and seek to market gaming and gambling applications, we must assess the legality of these types of activities in different jurisdictions. Our inability to launch these applications legally, the uncertain regulatory landscape for these applications and the significant costs associated with ongoing evaluations regarding the state of gaming and gambling laws around the world may adversely affect our business. Our multinational operations expose us to special risks that could increase our expenses, adversely affect our operating results and require increased time and attention of management. Our software products may contain errors, which could cause us to lose revenue and incur unexpected expenses. The interests of our majority owner may differ from yours and may result in OpenTV acting in a manner inconsistent with your general interests. Because we are controlled by Liberty Media, we are exempt from certain listing requirements of the Nasdaq National Market relating to corporate governance matters. Because we are a British Virgin Islands company, you may not be able to enforce judgments against us that are obtained in United States courts.

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1096958--3/31/2006--OPENTV_CORP