1098277--3/3/2006--WEBSENSE

related topics

{product, market, service}

{regulation, change, law}

{customer, product, revenue}

{acquisition, growth, future}

{personnel, key, retain}

{property, intellectual, protect}

{stock, price, operating}

{product, liability, claim}

{system, service, information}

{stock, price, share}

{operation, international, foreign}

{product, candidate, development}

{provision, law, control}

Our future success depends on our ability to sell new, renewal and upgraded subscriptions to Websense Enterprise and the related add-on products. Failure of our add-on products, particularly our security products, to achieve more widespread market acceptance will seriously harm our business. We face increasing competition, which places pressure on our pricing and which could prevent us from increasing revenue or maintaining profitability. In addition, as we increase our emphasis on our security-oriented products, we face competition from better-established security companies that have significantly greater resources. The market for our products continues to emerge, and if we are not successful in promoting awareness of the need for our products and of our Websense brand, our growth may be limited. Because we recognize revenue from subscriptions for our products ratably over the term of the subscription, downturns in sales may not be immediately reflected in our revenue. Sales to customers outside the United States have accounted for a significant portion of our revenue, and we expect this trend to continue, which exposes us to risks inherent in international sales. We may not be able to develop acceptable new products or enhancements to our existing products at a rate required by our rapidly changing market. If we acquire any companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results. Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall. The market price of our common stock is likely to be highly volatile and subject to wide fluctuations. We must develop and expand our indirect sales channels to increase revenue and improve our operating results. Our reliance on indirect sales channels could result in reduced revenue growth because we have little control over our value-added resellers, distributors and original equipment manufacturers. Any failure to protect our proprietary technology or establish our Websense brand would negatively impact our business. We may be sued by third parties for alleged infringement of their proprietary rights. Our database categories and our process for classifying URLs and software applications within those categories are subjective, and we may not be able to categorize URLs and software applications in accordance with our customers expectations. Our databases may fail to keep pace with the rapid growth and technological change of the Internet. Failure of our products to work properly or misuse of our products could impact sales, increase costs, and create risks of potential negative publicity and legal liability. Our worldwide income tax provisions and other tax accruals may be insufficient if any taxing authorities assume taxing positions that are contrary to our positions. We are subject to changes in financial accounting standards, which may adversely affect our reported financial results or the way we conduct business. We are dependent on our management team, and the loss of any key member of this team may prevent us from implementing our business plan in a timely manner. Our growth could strain our personnel and infrastructure resources, and if we are unable to implement appropriate controls and procedures to manage our growth, we may not be able to successfully implement our business plan. Because competition for our target employees is intense, we may not be able to attract and retain the highly skilled employees we need to support our planned growth. Our systems may be vulnerable to security risks or service disruptions that could harm our business. Evolving regulation of the internet may affect us adversely. It may be difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. We do not intend to pay dividends.

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1098277--3/3/2006--WEBSENSE_INC