Incredimail 2012 Annual Report Download - page 12

We have acquired and intend to continue to acquire other businesses. These acquisitions divert a substantial part of our resources and
management attention, could cause dilution to our shareholders and adversely affect our financial results.
We acquired Smilebox in August 2011 and SweetIM in November 2012, and we intend to continue to acquire complementary products,
technologies or businesses. Prior to these acquisitions our management had limited experience together as a team in making acquisitions or
integrating acquired businesses. Seeking and negotiating potential acquisitions to a certain extent diverts our management’
s attention from other
business concerns, is expensive and time-
consuming. New acquisitions could expose our business to unforeseen liabilities or risks associated
with the business or assets acquired or with entering new markets. In addition, we might lose key employees while integrating new organizations
and we might not effectively integrate the acquired products, technologies or businesses or achieve anticipated revenues or cost benefits. Future
acquisitions could result in customer dissatisfaction, performance problems with an acquired product, technology or company. Paying the
purchase price for acquisitions in the form of cash, debt or equity securities could weaken our cash position, increase our leverage or dilute our
existing shareholders, as the case may be. Furthermore, a substantial portion of the cost of these acquisitions is typically for intangible
assets. We may incur contingent liabilities, amortization expenses related to intangible assets, or possible impairment charges related to
goodwill or other intangible assets or other unanticipated events or circumstances relating to the acquisition, and we may not have, or may not be
able to enforce, adequate remedies in order to protect our Company. If any of these or similar risks relating to acquiring products, technologies
or businesses should occur in the future on a scale that is larger than the effect of the acquisition described above, our business could be
materially harmed.
If we are deemed to be not in compliance with applicable data protection laws, our operating results could be materially affected.
We collect and maintain certain information about our customers in our database. Such collection and maintenance of customer
information is subject to data protection laws and regulations in Israel and may be subject to laws and regulations in, the United States, the
European Union and other countries as well. A failure to comply with applicable regulations could result in class actions, governmental
investigations and orders, and criminal and civil liabilities, which could materially affect our operating results.
Although we strive to comply with the applicable laws and regulations and use our best efforts to comply with the evolving global
standards regarding privacy, and inform our customers of our business practices prior to any installations of our product and use of our services,
it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data collection and preservation practices, or
that it may be argued that our practices do not comply with other countries' privacy and data protection laws and regulations. In addition to the
possibility of fines, such a situation could result in the issuance of an order requiring that we change our data collection or retention practices,
which in turn could have a material effect on our business. See "Item 4.B Business Overview —
Government Regulation" for additional
discussion of applicable regulations.
If users or third parties express privacy or security concerns regarding our collection, use and handling of personal information, we
could incur substantial expenses.
Although we strive to comply with strict privacy data security requirements and take all reasonable steps to ensure the security of
personal information, concerns may be expressed, from time to time, about whether our products compromise the privacy or confidentiality of
the information of users and others. Concerns about our collection, use, sharing or handling of personal information or other privacy related
matters, even if unfounded, could damage our reputation and operating results. See "Item 4.B Business Overview —
Government Regulation"
for additional discussion of applicable regulations.
We depend on a third party Internet and telecommunication provider to operate our websites. Temporary failure of these services
would reduce our revenues and damage our reputation, and securing alternate sources for these services could significantly increase our
expenses.
Our websites are currently hosted on Amazon Web Services, Inc., Bezeq International Ltd. and Limelight Networks Inc. Each of such
companies may not continue to provide services to us without disruptions in services at the current cost or at all. Although there is certain
overlap between such companies, such a disruption in services by any one of them, even if temporary, would reduce our revenues from product
sales, and possibly even from search, depending on the extent of disruption. While we have begun migrating the hosting services to Amazon’
s
cloud based service, and we believe that there are many alternative providers of hosting and other communication services available to us, and
the company has a plan for adjusting and adapting in such an event, the costs associated with the contemplated and any other transition to a new
service provider could be substantial and require us to reengineer our computer systems and telecommunications infrastructure to accommodate
a new service provider. Such processes could be both expensive and time consuming and could result in lost business both during the transition
period and after.
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