1097338--4/2/2007--WITNESS_SYSTEMS

related topics

{system, service, information}

{acquisition, growth, future}

{product, market, service}

{stock, price, operating}

{financial, litigation, operation}

{property, intellectual, protect}

{regulation, change, law}

{operation, international, foreign}

{customer, product, revenue}

{personnel, key, retain}

{control, financial, internal}

{product, liability, claim}

{provision, law, control}

{investment, property, distribution}

{cost, operation, labor}

Our business and operating results may be adversely affected by our proposed acquisition by Verint. If our planned acquisition by Verint is not completed, our business, operating results and stock price may be adversely affected. Our operating results for 2001 to 2004 have been adversely impacted by the results of the voluntary review of our stock option practices and grants. Accounting for Stock Issued to Employees An SEC inquiry and litigation relating to certain of our stock option grants remain pending and could have an adverse effect on our business, operating results and stock price and may divert the attention of our management and other key employees. The implementation of new accounting rules related to the expensing of stock-based awards negatively impacted our operating results in 2006 and is expected to continue to do so in 2007 and thereafter. Any subsequent changes in accounting rules may also have an adverse effect on our results of operations. If we fail to protect our intellectual property, third parties may use our technology for their own benefit. Claims by other companies that our software infringes their intellectual property could require us to incur substantial costs or prevent us from selling our software or services. Because our products have a long sales cycle, it is more difficult to plan our expenses and forecast our results; and our operating results may fail to meet investor expectations and may fluctuate materially from period to period, which may adversely affect our stock price. If our products and services are not used and accepted by existing and prospective customers, our business and results of operations will be adversely affected. Our quarterly results are difficult to predict and adverse fluctuations in operating results could cause our stock price to fall. We may be unable to manage and expand our international operations, which may adversely affect our business and operating results. If we are unable to maintain a productive direct sales force, our business and operating results could be adversely affected. If we are unable to expand the distribution of our products through indirect sales channels, our business and operating results could be materially adversely affected. Competition in our business could adversely affect our revenue, profitability and market share. Our heavy reliance on sales of our recording, quality monitoring and workforce management software exposes us to risks of obsolescence due to changes in competitive product offerings. If we fail to develop new software or improve our existing software, we may not remain competitive. Our liability to customers may be substantial if our products fail to perform properly. If an original equipment manufacturer that is part of our indirect sales channel experiences technical difficulties, our product sales through that channel may be adversely affected. Our software may contain undetected errors or bugs, resulting in harm to our reputation and operating results. If our advanced compliance recording applications fail to record our customers interactions, we may be subject to liability and our reputation may be harmed. If we are unable to maintain the security of our systems, our business, financial condition and operating results could be harmed. Fluctuations in foreign currency exchange rates could affect our financial results. Certain provisions in agreements that we have entered into may expose us to liability for breach that is not limited in amount by the terms of the contract. If we are unable to maintain the compatibility of our software with certain other products and technologies, our future business would be adversely affected. If our professional services employees do not provide installation services effectively and efficiently, our customers may not use our installation services or may stop using our software. We may make acquisitions or investments that are not successful and that adversely affect our ongoing operations. If we need additional financing to maintain or expand our business, it may not be available on favorable terms, if at all. Our inability to source hardware could harm our business. We have reported material weaknesses in internal controls over financial reporting and cannot assure you that additional material weaknesses will not be identified in the future. If our internal controls over financial reporting or disclosure controls and procedures are not effective, there may be errors in our Consolidated Financials 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. Our stock price has been volatile. Government regulation of telephone and Internet monitoring could cause a decline in the use of our software, result in increased expenses for us or subject our customers and us to liability. If we are unable to attract and retain key personnel, our ability to effectively manage and grow our business would suffer. Our certificate of incorporation and bylaws, as well as Delaware law, may inhibit a takeover of our company, which could limit the price investors might be willing to pay for our securities.

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1097338--4/2/2007--WITNESS_SYSTEMS_INC