| You should refer to the explanation of the qualifications and limitations on forward-looking statements set forth at the beginning of Item 1 of this Annual Report on Form 10-K 20 _________________________________________________________________ Risks Related to Our Business We have a history of losses and if we fail to execute our growth strategy, our business could be materially and adversely affected |
| We historically have experienced substantial net losses, as reported in accordance with generally accepted accounting principles in the United States (GAAP), of dlra6dtta1 million in 2003 and net income of dlra2dtta2 million, and dlra3dtta0 million in 2004 and 2005, respectively |
| As of December 31, 2005, we had an accumulated deficit of approximately dlra21dtta1 million |
| We intend to maintain or increase our expenditures in all areas in order to execute our business plan |
| The likelihood of our success must be considered in light of the problems, expenses and delays frequently encountered in connection with new technologies, the design and manufacture of information technology security solutions, and the competitive environment in which we operate |
| You should not consider our historical results and recent growth as being indicative of future revenue levels or operating results |
| We can neither give assurance that we will operate profitably in the future nor that profitability will be sustained if it is achieved |
| The loss of significant customers could have a material adverse effect on our business and results of operations |
| We were dependent on five customers that represented 38prca of our consolidated revenue for the year ended December 31, 2005 |
| We have one enterprise customer, a major US Federal Agency, that accounted for 26prca of our consolidated revenue for 2005 |
| If our sales to our significant customers decline, our business, financial condition and results of operations could suffer |
| Any loss of governmental customers could have a material adverse effect on our business and prospects |
| In addition, we regularly license some of our products to customers who compete with us in other product categories |
| This potential conflict may deter existing and potential future customers from purchasing or licensing some of our products |
| We may not be able to successfully execute our growth strategy through acquisitions One of our key strategies is to grow our business by selectively pursuing acquisitions |
| There has been substantial consolidation in the information security industry, and we expect this consolidation to continue in the foreseeable future |
| As a result of this consolidation, we expect to increasingly compete against larger competitors with broader product offerings and greater resources, including software vendors, network providers and manufacturers of networking and computer equipment and communications devices |
| In order to remain competitive, we have acquired and intend to continue acquiring businesses that complement or expand our existing business, including acquisitions that could be material in size and scope |
| Although we believe we have been successful with this strategy in the past, we may not be able to successfully grow our business in the future through acquisitions for a number of reasons including: • our failure to identify suitable acquisition targets or, once identified, our failure to consummate the acquisition; • increased competition for targets resulting in increased acquisition costs; • a reduced number of acquisition targets due to consolidation in our industry; • the unavailability of acquisition financing on acceptable terms or at all; and • competition laws and regulations that may prevent us from making certain acquisitions |
| Our failure to successfully execute our growth strategy through acquisitions could have a material adverse effect on our business and future prospects |
| 21 _________________________________________________________________ Growing our business through acquisitions involves the risk that we may not successfully integrate the business or assets acquired or that we may not achieve the expected benefits from the acquisition |
| There are potential risks associated with growing our business through acquisitions, including the failure to successfully integrate and realize the expected benefits of an acquisition |
| With any past or future acquisition, there is the possibility that: • we may experience difficulties integrating the technologies and products of the acquired businesses, which can be particularly challenging when dealing with complex security technologies; • synergies, economies of scale and cost reductions may not occur as expected; • expected revenues may not be sufficient to offset increased expenses associated with the acquisition; • management may be distracted from overseeing existing operations by the need to integrate acquired businesses; • we may acquire or assume unexpected liabilities; • unforeseen difficulties may arise in integrating operations, including accounting, financial, managerial, back-office and other information systems; • we may fail to retain key employees of the acquired business; • we may experience problems in retaining customers and integrating customer bases; and • problems may arise in entering and competing in new markets in which we may have little or no experience and where competitors in such markets have stronger market positions |
| We cannot assure you that our acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition |
| We must also manage any growth resulting from such acquisitions effectively |
| Failure to manage growth effectively and successfully integrate the acquired company’s operations could have a material adverse effect on our business and operating results |
| Our quarterly operating results may fluctuate and our future revenues and profitability are uncertain |
| We have experienced significant fluctuations in our quarterly operating results during the last five years and anticipate continued substantial fluctuations in our future operating results |
| A number of factors have contributed to these quarterly fluctuations including, but not limited to: • introduction and market acceptance of new products and product enhancements by us or our competitors; • budgeting cycles of customers, including the US government; • timing and execution of individual contracts; • changes in the percentage of revenues attributable to OEM license fees and royalties; • length of time required by OEMs to embed our products into their products that will generate future royalties; 22 _________________________________________________________________ • competitive conditions in the highly competitive and increasingly consolidated information security industry; • changes in general economic conditions; and • shortfall of revenues in relation to expectations that formed the basis for the calculation of fixed expenses |
| It is likely that our operating results will fall below our expectations and the expectations of securities analysts or investors in some future quarter and the market price of our common stock could be materially adversely affected |
| If our subsidiary, Mykotronx, Inc, were to lose its eligibility as a small business under the rules of the Small Business Administration, it would incur additional costs and charges relating to disclosure, accounting and reporting to the US government |
| We do not believe Mykotronx’s status as a small business has had a material effect on SafeNet’s business |
| However, the loss of small business status may result in the company incurring additional charges and costs related to disclosure, accounting and reporting requirements applicable to a government contractor (either as a prime or subcontractor) not qualified as a small business |
| In addition, Mykotronx would no longer be eligible for small business set asides, which could make it more difficult for Mykotronx to pursue certain contract opportunities |
| Our industry is highly competitive and becoming increasingly consolidated, which may result in our losing customers and declining revenue |
| Our industry is relatively new, highly competitive and subject to rapid technological changes |
| Our future financial performance will depend, in large part, on our ability to establish and maintain an advantageous market position in the increasingly consolidated information security industry |
| We currently compete with companies that have substantially greater financial resources, sales and marketing organizations, market penetration and research and development capabilities, as well as broader product offerings and greater market presence and name recognition |
| For example, current competitors of our Enterprise Security Division include General Dynamics, L-3 Communications, Juniper Networks, Check Point Software, Cisco Systems and Nortel Networks |
| Current competitors of our Embedded Security Division include Broadcom, HiFn, Cavium and Certicom |
| The competitive risk will increase to the extent that competitors begin to include software vendors, network providers, and manufacturers of networking and computer equipment and communications devices who may be in a better position than us to develop information security products in anticipation of developments in their products and networks |
| Competitive factors in the information security industry include: • standards compliance; • product quality and reliability; • technical features; • network compatibility; • product ease of use; • client service and support; • distribution; and • price |
| Our failure to successfully compete in any of these areas could have a material adverse effect on our results of operations and financial condition |
| 23 _________________________________________________________________ We may not be able to protect our proprietary technologies |
| Our success and ability to compete is dependent, in part, upon our ability to maintain the proprietary nature of our technologies |
| We rely on a combination of patent, trade secret, copyright and trademark law and nondisclosure agreements to protect our intellectual property |
| We own 76 United States and foreign patents and have additional pending foreign and domestic patent applications |
| Our patents and patent applications protect various aspects of our network security technology and have expiration dates ranging from 2006 to 2022 |
| Although we hold several patents and have several pending patent applications that cover aspects of our technology, these patents and patent applications do not protect some of our security products and services |
| In addition, we may not receive patents for our current and future patent applications |
| Confidentiality, other non-disclosure agreements and other methods upon which we rely to protect our trade secrets, proprietary information and rights may not be adequate to protect such proprietary rights |
| Litigation to defend and enforce our intellectual property rights could result in substantial costs and diversion of resources and could have a material adverse effect on our financial condition and results of operations regardless of the final outcome of such litigation |
| Despite our efforts to safeguard and maintain our intellectual property, we may not be successful in doing so or the steps taken by us in this regard may not be adequate to deter misappropriation of our technology or prevent an unauthorized third party from copying or otherwise obtaining and using our products, technology or other information that we regard as proprietary |
| In addition, others may independently develop similar technologies or duplicate any technology developed by us |
| We may also be subject to additional risks as we enter into transactions in countries where intellectual property laws are not well developed or are poorly enforced |
| Legal protections of our rights may be ineffective in such countries, and technology developed in such countries may not be protected in jurisdictions where protection is ordinarily available |
| Our inability to protect our intellectual property would have a material adverse effect on our results of operations and financial condition |
| Due to the nature of the information security industry and our products, our products and technologies could infringe on the intellectual property rights of others, which may cause us to engage in costly litigation and, if we are not successful, could cause us to pay substantial damages and prohibit us from selling our products |
| The information security products we sell are complex by nature and incorporate a variety of technologies and methods |
| The use of these technologies and methods increases the risk that third parties may challenge the patents issued or licensed to us and the risk that a third party may claim our products infringe that third party’s intellectual property rights |
| We may not be able to successfully challenge these infringement claims or defend the validity of our patents and could have to pay substantial damages, possibly including treble damages, for past infringement if it is ultimately determined that our products infringe a third party’s upon patents |
| Further, we may be prohibited from selling our products before we obtain a license, which, if available at all, may require us to pay substantial royalties |
| Even if infringement claims against us are without merit, or if we challenge the validity of issued patents, lawsuits take significant time, may be expensive and may divert management attention from other business concerns |
| We may not be able to maintain effective product distribution channels, which could result in decreased revenue |
| We rely on both our direct sales force and an indirect channel distribution strategy for the sale and marketing of our products |
| Our sales and marketing organization may be unable to successfully compete against more extensive and well-funded sales and marketing operations of certain of our competitors |
| Additionally, we may be unable to attract integrators and resellers that can market our products effectively and provide timely and cost-effective customer support and service |
| Further, our distributors, integrators and resellers may carry competing lines of products |
| The loss of important sales personnel, distributors, integrators or resellers could adversely affect us |
| 24 _________________________________________________________________ Delays in product development could adversely affect market acceptance of our products |
| We may experience schedule overruns in product development triggered by factors such as insufficient staffing or the unavailability of development-related software, hardware or technologies |
| Further, when developing new security products, our development schedules may be altered as a result of the discovery of software bugs, performance problems or changes to the product specification in response to customer requirements, technology developments or self-initiated changes |
| All of these factors can cause a product to enter the market behind schedule, which may adversely affect market acceptance of the product or place it at a disadvantage to a competitor’s product that has already gained market share or market acceptance during the delay |
| We may be subject to product liability or other claims that could adversely affect our reputation with existing and potential customers and expose us to significant liability |
| The sale and installation of our systems and products entails a risk of product failure, product liability or other claims |
| An actual or perceived breach of network or data security, regardless of whether such breach is attributable to our products or services, could adversely affect our reputation and financial condition or results of operations |
| The complex nature of our products and services can make the detection of errors or failures difficult during the development process |
| If errors or failures are subsequently discovered, this may result in delays and lost revenues during the correction process |
| In addition, a malfunction or the inadequate design of our products could result in product liability claims |
| We attempt to reduce the risk of such losses by including warranty disclaimers and liability limitation clauses in our contracts with customers |
| However, we may not have obtained adequate contractual protection against liability in all instances |
| We currently maintain product liability insurance |
| However, our insurance coverage may not be adequate and any product liability claim for damages resulting from security breaches could be substantial |
| In the event of product liability litigation, insufficient insurance coverage could have a material adverse effect on our results of operations and financial condition |
| Further, some of our customers and future customers may require minimum product liability insurance coverage as a condition to purchasing our products |
| Failure to satisfy these insurance requirements could impede our ability to sell products and services to these customers, which could have a material adverse effect on our financial condition and results of operations |
| We cannot assure you that that insurance will be available to us at a reasonable cost or will be sufficient to cover all possible liabilities |
| We rely on single or limited sources for the manufacture and supply of our products |
| We rely upon a single or a limited number of sources for the manufacture and supply of our products |
| Our silicon chips are primarily manufactured by Analog Devices, Samsung, Toshiba, LSI, Cypress Semiconductor and Philips Semiconductor |
| We outsource the manufacturing of our appliance and token products primarily to ISO 9001/2000 registered, privately-held contract manufacturers |
| Because we depend on third party manufacturers and suppliers, we do not directly control product delivery schedules or product quality |
| In addition, we cannot assure you that we will be able to maintain satisfactory contractual relations with our manufacturers and suppliers |
| A significant delay in delivering products to our customers, whether from unforeseen events such as natural disasters or otherwise, could have a material adverse effect on our results of operations and financial condition |
| If we lose any of our manufacturers or suppliers, we expect that it would take from three to six months for a new manufacturer or supplier to begin full-scale production of one of our products |
| The delay and expense associated with qualifying a new manufacturer or 25 _________________________________________________________________ supplier and commencing production could result in a material loss of revenue and reduced operating margins and harm our relationships with customers |
| While we have not experienced any significant supply problems or problems with the quality of the manufacturing process of our suppliers and there have been no materially late deliveries of components or parts, it is possible that in the future we may encounter problems in the manufacturing process or shortages in parts, components, or other elements vital to the manufacture, production and sale of our products |
| We rely on key technical and management employees and if such employees become unavailable, our business could be adversely affected |
| The information security industry is highly specialized and the competition for qualified employees is intense |
| We expect this to remain so for the foreseeable future |
| We believe our success depends upon a number of key employees, such as our Chairman and Chief Executive Officer, our President and Chief Operating Officer and key technical personnel, and upon our ability to retain and hire additional key personnel |
| Several members of our management team have joined us in the last 18 months |
| It may be difficult for us to integrate these new employees into our existing management team |
| Further additions of new employees and departures of existing employees, particularly in key positions, can be disruptive and can result in further departures of our personnel |
| The loss of the services of key personnel or the inability to attract additional qualified personnel could materially and adversely affect our results of operations and product development efforts |
| We may be unable to achieve our revenue and operating performance objectives unless we can attract and retain technically qualified and highly skilled engineers, sales, technical, marketing, and management personnel |
| In 2001, we entered into a five-year employment agreement with Anthony A Caputo, our Chairman and Chief Executive Officer |
| In 2004, the employment agreement was amended to extend the original term from five to seven years |
| Also, in 2004 we entered into five-year employment agreements with our President and Chief Operating Officer, Carole D Argo, and our Senior Vice President and Chief Financial Officer, Kenneth Mueller, and in 2005, we entered into a three-year employment agreement with our Senior Vice President and General Manager of our Enterprise Security Division, Chris Fedde |
| However, we have not historically entered into employment agreements with our other employees |
| This may adversely impact our ability to attract and retain the necessary technical, management and other key personnel to successfully run our business |
| Management has identified a material weakness in our internal control over financial reporting that will require significant resources to remediate and could adversely affect our ability to report our financial results accurately |
| In connection with the evaluation of our internal controls over finanical reporting as of December 31, 2005, management identified a material weakness in internal control over financial reporting and concluded that they were not effective as of that date |
| The material weakness pertains to insufficient staffing and technical expertise in our accounting and financial reporting functions |
| The inadequate level of staffing and technical expertise results in certain accounting processes and controls around the financial statement close and financial reporting processes, the processes for accounting for non-routine tranactions and judgmental reserves, as well as certain controls over transactions processing, not being performed correctly, or on a timely basis |
| The lack of sufficient staffing and technical expertise has reduced the effectiveness of the existing accounting and financial reporting function, thereby increasing the risk of a financial statement misstatement |
| As a result, we were required to restate our financial statements for the three and six month periods ended June 30, 2005 and the three and nine month periods ended September 30, 2005 |
| We have taken steps to address this material weakness, including hiring two new accountants with relevant accounting experience and creating and filling the position of Director of Recognition of Revenue |
| In addition, we are seeking to fill positions in a newly created corporate controller group to review the consolidation of the worldwide operations and to provide a review function for financial information reported from our regional operation centers |
| We intend to hire approximately four accountants during 2006 with relevant accounting experience for this group, including a seasoned leader to manage this group |
| However, we cannot provide assurance that we will be able to hire qualified persons for these new positions or that the new positions we have established and the persons we hire to fill those positions will be sufficient to remediate the material weakness management has identified |
| The remediation of this material weakness will require us to expend significant resources and management time, which could adversely affect our results of operations |
| Also, if we are unable to successfully remediate this material weakness, we may not be able to report our financial results accurately, which may cause investors to lose confidence in our reported financial information and have an adverse effect on the trading price of our common stock |
| Our future success will depend upon our ability to anticipate and keep pace with technological changes and introduce new products and services in a timely manner |
| Our industry is characterized by rapid changes, including evolving industry standards, frequent introduction of new products and services, continuing advances in technology and changes in customer requirements and preferences |
| We expect technological developments to continue at a rapid pace in our industry |
| Accordingly, we cannot assure you that technological changes implemented by competitors, developers of operating or networking systems or persons seeking to breach network security will not cause 26 _________________________________________________________________ our technology to be rendered obsolete or non-competitive |
| Technology changes, software bugs, performance problems or customer requirements may also cause the development cycle for our new products to be significantly longer than our historical product development cycle, resulting in higher development costs or a loss in market share |
| Failure to develop and introduce new products and services and improve current products and services in a timely fashion could adversely affect us |
| Because of the complexity of our products and services or shortages of development personnel, we have from time to time experienced delays in introducing new and enhanced products and services |
| These products may require additional development work, enhancement and testing to achieve commercial success |
| If these or other new or recently introduced products have performance, reliability, quality or other shortcomings, such products could fail to achieve adequate market acceptance |
| The failure of our new or existing products to achieve or maintain market acceptance, whether for these or other reasons, could cause us to experience reduced orders, which in each case could have a material adverse effect on our business, financial condition and results of operations |
| Prolonged economic weakness in the Internet infrastructure, network security and related markets may decrease our revenues and margins |
| The market for our products and services depends on economic conditions affecting the broader Internet infrastructure, network security and related markets |
| Prolonged weakness in these markets has caused in the past and may cause in the future enterprises and carriers to delay or cancel security projects, reduce their overall or security-specific information technology budgets or reduce or cancel orders for our products |
| In this environment, our customers may experience financial difficulty, cease operations and fail to budget or reduce budgets for the purchase of our products and services |
| This, in turn, may lead to longer sales cycles, delays in purchase decisions, payment and collection, and may also result in price pressures, causing us to realize lower revenues and operating margins |
| In addition, general economic uncertainty caused by potential hostilities involving the United States, terrorist activities and the general decline in capital spending in the information technology sector make it difficult to predict changes in the information security requirements of our customers and the markets we serve |
| In light of these events, some businesses may curtail or eliminate capital spending on information technology |
| These factors may cause our revenues and operating margins to decline |
| If our products and services do not interoperate with our end-users’ networks, installations could be delayed or cancelled, which could significantly reduce our revenues |
| Our products are designed to interface with our end-users’ existing networks, each of which has different specifications and utilizes multiple protocol standards |
| Many of our end-users’ networks contain multiple generations of products that have been added over time as these networks have grown and evolved |
| Our products and services must interoperate with all of the products and services within these networks as well as with future products and services that might be added to these networks to meet our end-users’ requirements |
| If we find errors in the existing software used in our end-users’ networks, we may elect to modify our software to fix or overcome these errors so that our products will interface with their existing software and hardware |
| If our products do not interface with those within our end-users’ networks, customer installations could be delayed or orders for our products could be cancelled, which could significantly reduce our revenues |
| A decrease of average selling prices for our products and services could adversely affect our business |
| The average selling prices for our products and services may decline due to product introductions by our competitors, price pressures from significant customers and other factors |
| The market for our embedded products is dominated by a few large OEM vendors, who have considerable pricing power over 27 _________________________________________________________________ our company |
| In addition, with the general economic slowdown and decrease of information technology capital spending budgets, our customers often seek the lowest price for their security needs |
| To sell our products and services at higher prices, we must continue to develop and introduce new products and services that incorporate new technologies or high-performance features |
| If we experience pricing pressures or fail to develop new products, our revenues and gross margins could decline, which could harm our business, financial condition and results of operations |
| We face risks associated with our international business activities |
| International sales accounted for approximately 29prca of our consolidated revenue for the year ended December 31, 2005 |
| International sales are subject to risks related to imposition of governmental controls, export license requirements, restrictions on the export of critical technology, general economic conditions, fluctuations in currency values, translation of foreign currencies into US dollars, foreign currency exchange controls, tariffs, quotas, trade barriers and other restrictions, compliance with applicable foreign laws and other economic and political uncertainties |
| Some of our information security products contain encryption algorithms that are subject to the export restrictions administered by the Bureau of Industry and Security, US Department of Commerce |
| These restrictions permit the export of encryption products based on country, algorithm and class of end- user |
| They prohibit the export of encryption products to some countries and to business entities that are not included in a range of end-users |
| These restrictions may provide a competitive advantage to foreign competitors facing less stringent controls on their products and services |
| In addition, the list of countries, products and users for which export approval is required, and regulatory policies with respect thereto, could become more restrictive, and laws limiting the domestic use of encryption could be enacted |
| Our foreign distributors may also be required to secure licenses or formal permission before encryption products can be imported |
| Compliance with export restrictions has resulted in delays in shipping our products to certain end users in the past and may result in such delays in the future |
| A breach of network security could harm public perception of our products and services, which could cause us to lose revenue |
| If an actual or perceived breach of network security occurs in one of our end-users’ network systems, regardless of whether the breach is attributable to our products or services, the market perception of the effectiveness of our products and services could be harmed |
| Because the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques |
| Failure to anticipate new techniques or otherwise prevent breaches of network security could cause us to lose current and potential customers and revenues |
| Because a significant portion of our net assets is represented by goodwill that is subject to mandatory annual impairment evaluations, we could be required to write-off some or all of this goodwill, which may adversely affect our financial condition and results of operations |
| We account for all acquisitions using the purchase method of accounting |
| Under purchase method accounting, a portion of the purchase price for a business is allocated to identifiable tangible and intangible assets and assumed liabilities based on estimated fair values at the date of consummation |
| Any excess purchase price, which is very likely to constitute a significant portion of the purchase price, will be allocated to goodwill |
| In accordance with the Financial Accounting Standards Board’s Statement Nodtta 142, Goodwill and Other Intangible Assets, goodwill is not amortized but is reviewed annually, or more frequently if impairment indicators arise, for impairment |
| At December 31, 2005 our reported goodwill of dlra339dtta8 million represented 58prca of our reported net assets |
| When we perform future impairment tests, it is possible that the carrying value of this goodwill could exceed its implied fair value and therefore would require adjustment |
| Such adjustment would result in a charge to operating income in that period |
| Once adjusted, there can be no assurance that there will not be further adjustments for impairment in future periods |
| 28 _________________________________________________________________ The conversion of our 2dtta50prca convertible subordinated notes could adversely affect our available cash |
| Under the terms of our 2dtta50prca convertible subordinated notes that we issued in December 2005, upon conversion of the notes, we are required to pay the principal amount in cash, provided that we are not in default under any senior debt outstanding at such time |
| Assuming we have enough cash to pay the principal amount of the notes upon conversion, such payment may adversely affect our available cash, which could adversely affect our ability to conduct our operations, service any other debt or borrow money |
| The conversion price of the notes is dlra41dtta30 and the holders’ conversion rights are triggered when the closing price of our common stock over certain periods of time is more than dlra49dtta56 |
| RISKS RELATED TO OUR COMMON STOCK Anti-takeover provisions in our charter documents and under Delaware law and certain provisions of our 2dtta50prca convertible subordinated notes could discourage an acquisition of us by a third party |
| Our restated certificate of incorporation provides for the issuance of “blank check” preferred stock, which may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock |
| In addition, our bylaws provide that our stockholders may call a special meeting of stockholders only upon a written request of stockholders owning a majority of our capital stock |
| In addition, certain provisions under Delaware law restrict business combinations between a corporation and an owner of 15prca or more of the outstanding voting stock of the corporation for a three-year period |
| These provisions of our restated certificate of incorporation and bylaws and Delaware law could discourage, delay or prevent a third party from acquiring or merging with us, even if such action was beneficial to our stockholders and, in turn, the holders of the notes |
| Certain provisions of our 2dtta50prca convertible subordinated notes could make it more difficult or more expensive for a third party to acquire us |
| Upon the occurrence of certain transactions constituting a change of control of us, holders of the notes will have the right, at their option, to require us to repurchase all of their notes or any portion of the principal amount of such notes in integral multiples of dlra1cmam000 |
| We may also be required to issue additional shares upon conversion or provide for conversion into the acquirer’s capital stock in the event of certain transactions constituting a change of control |
| The price of our common stock may be volatile |
| In the past, the price of our common stock has experienced volatility due to a number of factors, some of which are beyond our control |
| The price of our common stock may continue to experience volatility in the future from time to time |
| Among the factors that could affect our stock price are: • our operating and financial performance and prospects; • quarterly variations in key financial performance measurer, such as earnings per share, net income and revenue; • changes in revenue or earnings estimates or publication of research reports by financial analysts; • announcements of technological innovations or new products by us or our competitors; • speculation in the press or investment community; • strategic actions by us or our competitors, such as acquisitions or restructurings; 29 _________________________________________________________________ • sales of our common stock or other actions by investors with significant shareholdings; • general market conditions for security and other technology companies; and • domestic and international economic, legal, political and regulatory factors unrelated to our performance |
| The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies |
| These broad market fluctuations may adversely affect the trading price of our common stock |