1114714--2/22/2006--KENEXA

related topics

{product, market, service}

{system, service, information}

{financial, litigation, operation}

{customer, product, revenue}

{cost, operation, labor}

{regulation, change, law}

{personnel, key, retain}

{property, intellectual, protect}

{acquisition, growth, future}

{tax, income, asset}

{condition, economic, financial}

{operation, international, foreign}

{stock, price, operating}

{operation, natural, condition}

{provision, law, control}

{stock, price, share}

{cost, regulation, environmental}

We operate in a market environment that involves significant risks, many of which are beyond our control. The following risk factors may adversely impact our results of operations, cash flows and the market price of our common stock. Although we believe that we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our performance or financial condition. Our business may not continue to grow if the markets for our products do not continue to grow. If our on-demand delivery model is not widely accepted, our operating results will be harmed. Our business will suffer if our existing clients terminate or do not renew their software subscriptions. If we fail to develop or acquire new products or enhance our existing solutions to meet the needs of our existing and future clients, our revenue may decline. We may engage in future acquisitions or investments which present many risks, and we may not realize the anticipated financial and strategic goals for any of these transactions. If our efforts to attract new clients or to sell additional solutions to our existing clients are not successful, our revenue growth will be adversely affected. If we are unable to compete effectively with companies offering enterprise talent acquisition and employee performance management solutions, our revenue may decline. Mergers or other strategic transactions involving our competitors could weaken our competitive position or reduce our revenue. If we encounter barriers to the integration of our software with software provided by our competitors or with the software used by our clients, our revenue may decline and our research and development expenses may increase. Reductions in information technology spending could limit our ability to grow our business. Because we recognize revenue from the sale of our solutions ratably over the term of the subscription period, a significant downturn in our business may not be immediately reflected in our operating results. Our financial performance may be difficult to forecast as a result of our focus on large clients and the long sales cycle associated with our solutions. Interruptions or delays in service from our Web hosting facilities could impair the delivery of our service and harm our business. If our security measures are breached and unauthorized access is obtained to client data, clients may curtail or stop their use of our solutions, which would harm our business, operating results and financial condition. Because our products collect and analyze applicants' and employees' stored personal information, concerns that our products do not adequately protect the privacy of applicants and employees could inhibit sales of our products. We may increase our sales and marketing efforts to clients outside the United States, which would expose us to additional risks associated with international operations, including the risks of managing a geographically diverse operation and foreign currency exchange rate fluctuations. We may be unsuccessful in establishing and maintaining our planned facilities in India and Malaysia. If the unemployment rate increases materially, our business may be harmed. Material defects or errors in our software could affect our reputation, result in significant costs to us and impair our ability to sell our solutions, which would harm our business. If we fail to adequately protect our proprietary rights, our competitive advantage could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights. Our results of operations may be adversely affected if we are subject to a protracted infringement claim or a claim that results in a significant damage award. Changes in the regulatory environment and general economic condition in India and elsewhere could have a material adverse effect on our business. We employ technology licensed from third parties for use in or with our solutions, and the loss or inability to maintain these licenses on similar terms or errors in the software we license could result in increased costs, or reduced service levels, which would adversely affect our business. Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall. If we do not retain key personnel, our ability to manage our business and continue our growth could be negatively impacted. Our chief financial officer is a defendant in litigation that may require a significant amount of his attention. We will not be able to maintain our revenue growth if we do not attract, train or retain qualified sales personnel. Failure to implement the appropriate controls and procedures to manage our growth could harm our growth, business, operating results and financial condition. Evolving European Union regulations related to confidentiality of personal data may adversely affect our business. Our ability to use Webhire's net operating loss carryforwards in the United States will be significantly limited. Any impairment in the value of our goodwill will result in an accounting charge against our earnings, which could negatively impact our stock price. Evolving regulation of the Internet may increase our expenditures related to compliance efforts, which may adversely affect our financial condition. The failure of our solutions to comply with employment laws may require us to indemnify our clients, which may harm our business. Our reported financial results may be adversely affected by changes in generally accepted accounting principles. Anti-takeover provisions of Pennsylvania law and our articles of incorporation and bylaws could delay and discourage takeover attempts that shareholders may consider to be favorable. The market price of our common stock may be particularly volatile, and our shareholders may be unable to resell their shares at a profit.

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1114714--2/22/2006--KENEXA_CORP