1207074--6/3/2008--VIRTUSA

related topics

{regulation, government, change}

{system, service, information}

{condition, economic, financial}

{regulation, change, law}

{acquisition, growth, future}

{operation, international, foreign}

{personnel, key, retain}

{customer, product, revenue}

{competitive, industry, competition}

{property, intellectual, protect}

{product, market, service}

{financial, litigation, operation}

{stock, price, operating}

{cost, contract, operation}

{provision, law, control}

{operation, natural, condition}

{loan, real, estate}

We depend on clients primarily located in the United States and the United Kingdom, as well as clients concentrated in specific industries, such as BFSI, and are therefore subject to risks relating to developments affecting these clients and industries that may cause them to reduce or postpone their IT spending. A significant or prolonged economic downturn in the IT services industry, or industries in which we focus, may result in our clients reducing or postponing spending on the services we offer. The IT services market is highly competitive and our competitors may have advantages that may allow them to compete more effectively than we do to secure client contracts and attract skilled IT professionals. If we cannot attract and retain highly-skilled IT professionals, our ability to obtain, manage and staff new projects and continue to expand existing projects may result in loss of revenue and an inability to expand our business. Our quarterly financial position, revenue, operating results and profitability are difficult to predict and may vary from quarter to quarter, which could cause our share price to decline significantly. We are investing substantial cash in new facilities and our profitability could be reduced if our business does not grow proportionately. The international nature of our business exposes us to several risks, such as significant currency fluctuations and unexpected changes in the regulatory requirements of multiple jurisdictions. Currency exchange rate fluctuations may negatively affect our operating results. The loss of key members of our senior management team may prevent us from executing our business strategy. We may lose revenue if our clients terminate or delay their contracts with us. We invest in auction rate securities that are subject to market risk and the recent problems in the financial markets could adversely affect the value and liquidity of our assets. We may face damage to our professional reputation if our services do not meet our clients expectations. We may not be able to continue to maintain or increase our profitability and our recent growth rates may not be indicative of our future growth. Restrictions on immigration may affect our ability to compete for and provide services to clients in the United States or the United Kingdom, which could result in lost revenue and delays in client engagements and otherwise adversely affect our ability to meet our growth and revenue projections. Our management has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business. We may be required to spend substantial time and expense before we can recognize revenue, if any, from a client contract. We may not be able to recognize revenue in the period in which our services are performed, which may cause our margins to fluctuate. Our inability to manage to a desired onsite-to-offshore service delivery mix may negatively affect our gross margins and costs and our ability to offer competitive pricing. Our profitability is dependent on our billing and utilization rates, which may be negatively affected by various factors. If we fail to manage our rapid growth effectively, we may not be able to obtain, develop or implement new systems, infrastructure, procedures and controls that are required to support our operations, maintain cost controls, market our services and manage our relationships with our clients. Unexpected costs or delays could make our contracts unprofitable. We may face liability if we inappropriately disclose confidential client information. Our failure to anticipate rapid changes in technology may negatively affect demand for our services in the marketplace. Interruptions or delays in service from our third-party providers could impair our global delivery model, which could result in client dissatisfaction and a reduction of our revenue. Our ability to raise capital in the future may be limited and our failure to raise capital when needed could prevent us from growing. Potential future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our financial results. Some of our client contracts contain restrictions or penalty provisions that, if triggered, could result in lower future revenue and decrease our profitability. Negative public perception in the United States and the United Kingdom regarding offshore IT service providers and proposed legislation may adversely affect demand for our services. Our results of operations and business may be adversely affected by an investigation currently being conducted by the Wage and Hour Division of the U.S. Department of Labor. Our services may infringe on the intellectual property rights of others, which may subject us to legal liability, harm our reputation, prevent us from offering some services to our clients or distract management. Any claims or litigation involving intellectual property, whether we ultimately win or lose, could be extremely time-consuming, costly and injure our reputation. Risks related to our Indian and Sri Lankan operations Political instability or changes in the government in India could result in the change of several policies relating to foreign direct investment and repatriation of capital and dividends. Further, changes in the economic policies could adversely affect economic conditions in India generally and our business in particular. Changes in the policies of the government of Sri Lanka or political instability could delay the further liberalization of the Sri Lankan economy and adversely affect economic conditions in Sri Lanka, which could adversely affect our business. Regional conflicts or terrorist attacks and other acts of violence or war in India, Sri Lanka, the United States or other regions could adversely affect financial markets, resulting in loss of client confidence and our ability to serve our clients which, in turn, could adversely affect our business, results of operations and financial condition. Our net income may decrease if the governments of the United Kingdom, the United States, India or Sri Lanka adjust the amount of our taxable income by challenging our transfer pricing policies. Our net income may decrease if the governments of India or Sri Lanka reduce or withdraw tax benefits and other incentives provided to us or levy new taxes. Newly-enacted legislation in India could harm our results of operations and ability to attract, hire and retain qualified personnel. Wage pressures and increases in government mandated benefits in India and Sri Lanka may reduce our profit margins. Our facilities are at risk of damage by earthquakes, tsunamis and other natural disasters. The laws of India and Sri Lanka do not protect intellectual property rights to the same extent as those of the United States and we may be unsuccessful in protecting our intellectual property rights. Unauthorized use of our intellectual property rights may result in loss of clients and increased competition. Risks related to our common stock Provisions in our charter documents and under Delaware law may prevent or delay a change of control of us and could also limit the market price of our common stock.

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1207074--6/3/2008--VIRTUSA_CORP