1368582--7/22/2008--ArcSight

related topics

{system, service, information}

{product, market, service}

{property, intellectual, protect}

{stock, price, operating}

{operation, international, foreign}

{regulation, government, change}

{provision, law, control}

{acquisition, growth, future}

{stock, price, share}

{customer, product, revenue}

{personnel, key, retain}

{control, financial, internal}

{cost, contract, operation}

{competitive, industry, competition}

{tax, income, asset}

Our sales cycle is long and unpredictable, and our sales efforts require considerable time and expense. As a result, our revenues are difficult to predict and may vary substantially from quarter to quarter, which may cause our operating results to fluctuate. If we fail to further develop and manage our distribution channels, our revenues could decline and our growth prospects could suffer. We have limited experience with sale, manufacture, delivery, service and support of Logger and our other appliance products, and we may be unable to successfully forecast demand or fulfill orders for these appliance products. Because we derive a significant majority of our revenues from ArcSight ESM and related products and services, any failure of this product to satisfy customer demands or to achieve increased market acceptance will harm our business, operating results, financial condition and growth prospects. If we are unable to successfully market our recently introduced products, successfully develop new products, make enhancements to our existing products or expand our offerings into new markets, our business may not grow and our operating results may suffer. If we are not able to maintain and enhance our brand, our business and operating results may be harmed. We face intense competition in our market, especially from larger, better-known companies, and we may lack sufficient financial or other resources to maintain or improve our competitive position. We may not be able to compete effectively with companies that integrate or bundle products similar to ours with their other product offerings. We face risks related to customer outsourcing to managed security service providers. Our business depends, in part, on sales to the public sector, and significant changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business. Failure to comply with laws or regulations applicable to our business could cause us to lose U.S. government customers or our ability to contract with the U.S. government. Our government contracts may limit our ability to move development activities overseas, which may impair our ability to optimize our software development costs and compete for non-government contracts. Real or perceived errors, failures or bugs in our products could adversely affect our operating results and growth prospects. Incorrect or improper use of our complex products, our failure to properly train customers on how to utilize our products or our failure to properly provide consulting and implementation services could result in customer dissatisfaction and negatively affect our results of operations and growth prospects. If we are unable to maintain effective relationships with our technology partners, we may not be able to support the interoperability of our software with a wide variety of security and other products and our business may be harmed. Our international sales and operations subject us to additional risks that can adversely affect our operating results. Our business in countries with a history of corruption and transactions with foreign governments increase the risks associated with our international activities. Failure to protect our intellectual property rights could adversely affect our business. Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information. We may in the future be subject to intellectual property rights claims, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies. We rely on software licensed from other parties, the loss of which could increase our costs and delay software shipments. Some of our products contain open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business. Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses. Changes or reforms in the law or regulatory landscape could diminish the demand for our solutions, and could have a negative impact on our business. If we are unable to attract and retain personnel, our business would be harmed. If we fail to manage future growth effectively, our business would be harmed. Future acquisitions could disrupt our business and harm our financial condition and results of operations. If we fail to maintain an effective system of internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired. We may not be able to utilize a significant portion of our net operating loss carry-forwards, which could adversely affect our operating results. Governmental export or import controls could subject us to liability or limit our ability to compete in foreign markets. Risks Related to Ownership of Our Common Stock Our stock price may be volatile or may decline regardless of our operating performance. A significant portion of our total outstanding shares may be sold into the market in the near future. If there are substantial sales of shares of our common stock, the price of our common stock could decline. If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline. Our directors, executive officers and principal stockholders have substantial control over us and could delay or prevent a change in corporate control. Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

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1368582--7/22/2008--ArcSight_Inc