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If we are unable to continue the diversification of our revenues, a significant portion of our revenues will continue to be derived from
wireline products and application services, which could weaken our financial position.
For 2002, we expect more of our total revenues to come from our merchant and wireless business areas than in prior years. Our ability to
diversify our revenues could be hindered by numerous risks, including:
our ability to effectively develop, market and sell our products and application services to new and existing customers;
the continued development of electronic commerce on the Internet;
the adoption of our products and application services by wireless carriers and device manufacturers;
the adoption of our services for delivery over broadband wireline platforms (DSL and cable) and broadband wireless standards (2.5G
and 3G); and
the use of our products and application services by subscribers on their wireless devices.
Our future earnings could be negatively affected by significant charges resulting from the impairment in the value of acquired assets.
For acquisitions which we have accounted for using the purchase method, we regularly evaluate the recorded amount of long lived assets,
consisting primarily of goodwill, assembled workforce, acquired contracts and core technology, to determine whether there has been any
impairment of the value of the assets and the appropriateness of their estimated remaining life. We evaluate impairment whenever events or
changed circumstances indicate that the carrying amount of the long lived assets might not be recoverable. During the fourth quarter of 2000,
we determined that intangible assets from two purchase acquisitions had been impaired. Accordingly, we recorded an impairment charge of
$9.0 million in the year ended December 31, 2000. In the year ended December 31, 2001, we determined that intangible assets from eleven
purchase acquisitions had partial or full impairment. Accordingly, we recorded an impairment charge of $107.7 million in the period. We will
continue to regularly evaluate the recorded amount of our long lived assets and test for impairment. In the event we determine that any long
lived asset has been impaired, we will record additional impairment charges in future quarters.
In addition, recent changes in GAAP will require us to discontinue amortizing goodwill and certain intangibles. We adopted these changes
effective January 1, 2002. Under this approach, goodwill and certain intangibles will not be amortized into results of operations, but instead
will be reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of
goodwill and certain intangibles is more than its fair value. As we have previously disclosed, we expect to incur a non cash charge estimated to
range from $100 million to $200 million, which will be recorded in the first quarter of 2002 for the cumulative effect of adopting SFAS No.
142. We have retained an independent valuation firm to conduct the valuation analysis pursuant to SFAS 142 and we expect to receive the
results of their analysis by the end of April 2002. There can be no assurance that the results of the analysis by this independent valuation firm
will not result in a non cash charge less than or in excess, perhaps substantially, of the amount previously estimated and disclosed by us.
Our financial and operating results will suffer if we are unsuccessful at integrating acquired businesses.
We have acquired a large number of complementary technologies and businesses in the past, and may do so in the future. Acquisitions
typically involve potentially dilutive issuances of stock, the incurrence of additional debt and contingent liabilities or large write offs and
amortization expenses related to certain intangible assets. Past and future acquisitions involve numerous risks which could adversely affect our
results of operations or stock price, including:
assimilating the operations, products, technology, information systems and personnel of acquired companies;