1168195--3/16/2009--SOURCEFIRE

related topics

{customer, product, revenue}

{system, service, information}

{property, intellectual, protect}

{product, market, service}

{acquisition, growth, future}

{provision, law, control}

{stock, price, operating}

{stock, price, share}

{personnel, key, retain}

{financial, litigation, operation}

{regulation, change, law}

{regulation, government, change}

{operation, international, foreign}

New competitors could emerge and could impair our sales. Our quarterly operating results are likely to vary significantly and be unpredictable, in part because of the purchasing and budget practices of our customers, which could cause the trading price of our stock to decline. The market for network security products is rapidly evolving, and the complex technology incorporated in our products makes them difficult to develop. If we do not accurately predict, prepare for and respond promptly to technological and market developments and changing customer needs, our competitive position and prospects will be harmed. If our new products and product enhancements do not achieve sufficient market acceptance, our results of operations and competitive position will suffer. If existing customers do not make subsequent purchases from us or renew their support arrangements with us, or if our relationships with our largest customers are impaired, our revenue could decline. The U.S. government has contributed to our revenue growth and has become an important customer for us. If we cannot attract sufficient government agency customers, our revenue and competitive position will suffer. We are subject to risks of operating internationally that could impair our ability to grow our revenue abroad. In the future, we may not be able to secure financing necessary to operate and grow our business as planned, or to make acquisitions. If we are not able to acquire additional businesses, products or technologies, our long-term growth strategy could be harmed; acquisitions could also negatively affect our results of operations and financial condition. If other parties claim commercial ownership rights to Snort or ClamAV, our reputation, customer relations and results of operations could be harmed. Our products contain third party open source software, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products. We could be prevented from selling or developing our products if the GNU General Public License and similar licenses under which our products are developed and licensed are not enforceable or are modified so as to become incompatible with other open source licenses. Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our products without compensating us. Efforts to assert intellectual property ownership rights in our products could impact our standing in the open source community, which could limit our product innovation capabilities. Claims that our products infringe the proprietary rights of others could harm our business and cause us to incur significant costs. We rely on software licensed from other parties, the loss of which could increase our costs and delay software shipments. Defects, errors or vulnerabilities in our products would harm our reputation and business and divert resources. Our networks, products and services are vulnerable to, and may be targeted by, hackers. We utilize a just-in-time contract manufacturing and inventory process, which increases our vulnerability to supply disruption. We depend on a single source to manufacture our enterprise class intrusion sensor product; if that sole source were to fail to satisfy our requirements, our sales revenue would decline and our reputation would be harmed. We depend on resellers, distributors and other partners for our sales; if they fail to perform as expected, our revenue will suffer. If we do not continue to establish and effectively manage our indirect distribution channels, our revenue could decline. Our inability to hire or retain key personnel would slow our growth. Our inability to effectively manage our expected headcount growth and expansion and our additional obligations as a public company could seriously harm our ability to effectively run our business. The price of our common stock may be subject to wide fluctuations. Sales of substantial amounts of our common stock in the public markets, or the perception that they might occur, could reduce the price that our common stock might otherwise attain. We and certain of our officers and directors have been named as co-defendants in, and are the subject of, certain legal proceedings in connection with our IPO. We have entered into an agreement to settle these proceedings, although the settlement may not be approved, in which case the litigation could continue, which may result in substantial costs and divert management s attention and resources. Our business is subject to complex corporate governance, public disclosure, accounting and tax requirements that have increased both our costs and the risk of noncompliance. We implemented a new enterprise resource planning system and any material disruption or problem with the implementation or operation of this system may result in disruption to our business, operating processes and internal controls. Potential uncertainty resulting from unsolicited acquisition proposals and related matters may adversely affect our business. Anti-takeover provisions in our charter documents and under Delaware law and our adoption of a stockholder rights plan could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

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1168195--3/16/2009--SOURCEFIRE_INC