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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
 Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED
    DECEMBER 31, 2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD
    FROM          TO       COMMISSION FILE NUMBER 000-31321
 RIGHTNOW TECHNOLOGIES,
    INC.
 (Exact name of registrant as
    specified in its charter)
  DELAWARE

81-0503640(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)   136 ENTERPRISE BLVD, BOZEMAN, MONTANA 59718
 (Address of principal executive
    offices) (Zip code)
  (406) 522-4200
 (Registrants telephone
    number, including area code)
 Securities registered pursuant
    to Section 12(b) of the Act:
  Title of Each Class:

Name of Each Exchange on Which Registered:COMMON STOCK, PAR VALUE $0.001

THE NASDAQ STOCK MARKET LLC   Securities registered pursuant to Section 12(g) of the
    Act:
 NONE
  þ o
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o (Do not check if a smaller
    reporting company)
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE:
  Form 10-K, Form 10-K, Form 10-K.




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##### 





RightNow
    Technologies, Inc.
  Annual
    Report on
    Form 10-K
  For The
    Fiscal Year Ended December 31, 2010
  Table of
    Contents
   
 PART IItem 1.


Business


4Item 1A.


Risk Factors


15Item 1B.


Unresolved Staff Comments


28Item 2.


Properties


28Item 3.


Legal Proceedings


28Item 4.


(Removed and Reserved)


29PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


29Item 6.


Selected Financial Data


31Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


32Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


46Item 8.


Financial Statements and Supplementary Data


47Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


47Item 9A.


Controls and Procedures


47Item 9B.


Other Information


50PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


50Item 11.


Executive Compensation


50Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


50Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


51Item 14.


Principal Accounting Fees and Services


51PART IVItem 15.


Exhibits, Financial Statement Schedules


51Signatures


55EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1   2




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CAUTIONARY
    STATEMENT
  In this report, the terms RightNow Technologies,
    RightNow, Company, we,
    us and our refer to RightNow
    Technologies, Inc. and its separate, wholly-owned independent
    subsidiaries.
  All statements included or incorporated by reference in this
    report, other than statements or characterizations of historical
    fact, are forward-looking statements within the meaning of the
    Private Securities Litigation Reform Act of 1995. These
    forward-looking statements are based on our current
    expectations, estimates and projections about our industry,
    managements beliefs, and certain assumptions made by us,
    all of which are subject to change. Forward-looking statements
    can often be identified by words such as
    anticipates, expects,
    intends, plans, predicts,
    believes, seeks, estimates,
    may, will, should,
    would, could, potential,
    continue, ongoing, similar expressions,
    and variations or negatives of these words, and include, but are
    not limited to, statements regarding projected results of
    operations, managements future strategic plans, market
    acceptance and performance of our products, our ability to pay
    interest and principal when due on our convertible senior notes
    or to repurchase such notes in certain circumstances, our
    ability to retain and hire key executives, sales and technical
    personnel and other employees in the numbers, with the
    capabilities, and at the compensation levels needed to implement
    our business and product plans, the competitive nature of and
    anticipated growth in our markets, ability to find suitable
    acquisitions on favorable terms, if at all, our accounting
    estimates, and our assumptions and judgments. These forward
    looking statements are not guarantees of future results and are
    subject to risks, uncertainties and assumptions that are
    difficult to predict and that could cause our actual results to
    differ materially and adversely from those expressed in any
    forward-looking statement. The risks and uncertainties referred
    to above include, but are not limited to, fluctuations in
    foreign currency exchange rates; our business model; our ability
    to develop or acquire and gain market acceptance for new
    products and enhancements to existing products in a
    cost-effective and timely manner; fluctuations in our earnings
    as a result of potential changes to our valuation allowance(s)
    on our deferred tax assets; competitive pressures and other
    similar factors such as the availability and pricing of
    competing products and technologies and the resulting effects on
    sales and pricing of our products; our ability to expand or
    contract operations, manage expenses and grow profitability; the
    rate at which our present and future customers adopt our
    existing and future products and services; fluctuations in our
    operating results including our revenue mix and our rate of
    growth; fluctuations in backlog; the risk that our investments
    in partner relationships and additional employees will not
    achieve expected results; our ability to manage and expand our
    partner relationships; interruptions or delays in our hosting
    operations; general economic conditions; breaches of our
    security measures; our ability to protect our intellectual
    property from infringement, and to avoid infringing on the
    intellectual property rights of third parties; any unanticipated
    ambiguities in fair value accounting standards; the amount and
    timing of any stock repurchases under our stock repurchase
    program; fluctuations in our operating results from the impact
    of stock-based compensation expense; our ability to hire, retain
    and motivate our employees and manage our growth; our ability to
    successfully integrate the products and people that we acquire
    through acquisitions; the impact of potential future
    acquisitions, if any; risks associated with our recent offering
    of convertible senior notes including the potential impact on
    earnings per share calculations; and various other factors, some
    of which are described under the section below entitled
    Risk Factors, in Item 1A of this report. These
    forward-looking statements speak only as of the date of this
    report. We undertake no obligation to revise or update publicly
    any forward-looking statement for any reason, except as
    otherwise required by law.
 3




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##### Table of Contents



Part I  Item 1.
    Business  OVERVIEW
  tm tune-ups,
  59718-9300, (406) 522-4200. http://www.rightnow.com Form 10-K, Form 10-Q, Form 8-K,
  Recent
    Developments
    PRODUCTS
    AND SERVICES
  RightNow
    CXtm, the Customer Experience Suite
   4




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tm
  
  RightNow
    WebtmExperience
    
    Intent Guide    
    Web Self-Service  24-hours-a-day.
  
    Mobile    
    Chat and Co-Browse   5




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
    Email Management    RightNow
    SocialtmExperience
    
    CX for Facebook    
    Support Community    
    Innovation Community    
    Cloud Monitor    RightNow
    Contact
    CentertmExperience
    
    Intelligent Voice Automation (IVR)    
    RightNows Dynamic Agent Desktop  just-in-time
 6




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##### Table of Contents



RightNow
    Engagetm
    
    Service-Sales-Marketing    
    Service:   Business processes that support
    efficient and effective problem resolution and customer support
    across channels.
    Sales:  Business processes that support
    revenue-generation, such as sales automation, opportunity
    management, and upsell and cross-sell.
    Marketing:  Business processes that drive
    personalized, proactive customer communication such as email
    marketing, lead generation and campaign management.  
    Customer Feedback:  voice-of-the-customer
  
    Analytics:    RightNow
    CX Cloud
    Platformtm
    
    App Builder:    
    Custom Objects:  allows integrators and
    administrators to create and customize business objects in the
    RightNow database schema, enabling them to create new
    applications, interaction channels, and components on the
    RightNow CX Cloud platform.
    Connect:  enables developers and integrators to
    leverage open standards-based API capabilities to rapidly and
    cost-effectively integrate RightNow CX into virtually anything,
    including desktop applications, backend systems, telephony
    systems, and the web. This allows organizations to unify their
    systems data to provide insightful information exchanges across
    all customer touch-points.
    Experience Design:  allows business
    administrators and designers to easily configure RightNow CX for
    engaging experiences. With visual design tools and standard web
    languages, users can quickly tailor workflows, workspaces,
    business rules and process definitions to design consistent
    multi-channel customer experiences.  
    Knowledge Foundation   7




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
    RightNow Natural Language Search    RightNow
    Mission Critical Operations
    
    RightNow Government Cloud  800-37, 800-53,
  
    RightNow PCI Certified Cloud    RightNow
    CX Commitment
    
    Focus on Results    
    Easy to Buy    
    Expertise    Professional
    Services
   8




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tune-up
    Sales and
    Marketing
      Convergys, Teleperformance, and TELUS.
            Clients
    and Backlog
   9




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December 31,2009


2010Current committed backlog

$
117,600


$
126,860Non-current committed backlog


57,020



27,314Total firm committed backlog


174,620



154,174Current backlog subject to termination for convenience


3,400



21,759Non-current backlog subject to termination for convenience


1,980



119,897Total backlog

$
180,000


$
295,830             year-to-year quarter-to-quarter
 10




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year-to-year quarter-to-quarter
  Product
    Development and Technology
      Intuitive Knowledge Foundation.
  Integration with Other Enterprise
    Applications. up-to-date
  Highly Customizable and Usable User
    Interface.
 11




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Software Architecture.
  Intellectual
    Property
      Implicit Rating of Retrieved Information in an Information
    Search System.
  Temporal Updates of Relevancy Rating of Retrieved Information
    in an Information Search System.
  Usage Based Strength between Related Information in an
    Information Retrieval System.
  System and Method for Generating a Dynamic Interface through
    a Communications Network.
  Usage Based Strength between Related Help Topics and Context
    Based Mapping Thereof in a Help Information retrieval
    System.
  Display Screen for a Computer.
  Method for Routing Electronic Correspondence Based on the
    Level and Type of Emotion Contained Therein.
 12




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Method of Clustering Automation and Classification
    Techniques.
  Method and System for Sending Bulk Electronic
    Messages.
  System for Automated Control and Reporting of Sales
    Process.
  Automated Adaptive Classification System for
    Non-Probabilistic Knowledge Networks.
  Leveraging
    User-to-User
    Interactions in a Knowledgebase Using a Forum
    Interface.
    System and Method for Generating a Dynamic Interface via a
    Communications Network (European Patent and Corresponds with US
    approved patent above)
  ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® tm , tm tm tm tm tm tm tm tm tm tm tm tm tm tm tm tm tm
   13




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Competition
              on-demand
  
    Low total cost of ownership and easily demonstrable
    cost-effective benefits for clients;
    Effectiveness in improving the quality of clients
    interactions with their customers across customer service, sales
    and marketing departments;
    Broad product functionality to meet complex client process
    requirements;
    Ability to leverage information from customer interactions to
    more accurately target marketing efforts and enhance revenue
    opportunities;
    Speed and ease of implementation;
    Ease of use and associated high rates of utilization;
    System performance, security, scalability, flexibility and
    reliability; 14




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
    Ease of integration with existing applications and data;
    Availability and quality of implementation, consulting and
    education services;
    Quality of client care;
    Competitive sales and marketing capabilities; and
    Financial stability and reputation of the vendor.    Employees
    Item 1A.
    Risk
    Factors  Before deciding to purchase, hold or sell our common stock,
    you should carefully consider the risks described below, in
    addition to the other cautionary statements and risks described
    elsewhere and the other information contained in this report and
    in our other filings with the SEC, including our reports on
    Forms 10-Q
    and 8-K. The
    risks and uncertainties described below are not the only ones we
    face. Additional risks and uncertainties not presently known to
    us or that we currently deem immaterial may also affect our
    business. If any of these known or unknown risks or
    uncertainties actually occurs with material adverse effects on
    RightNow, our business, financial condition and results of
    operations could be seriously harmed. In that event, the market
    price for our common stock could decline and you may lose all or
    part of your investment.
  We
    have significant international sales and are subject to risks
    associated with operating in international markets including the
    risk of foreign currency exchange rate
    fluctuations.
    
    fluctuations in foreign currency exchange rates;
    political, social and economic instability, including terrorist
    attacks and security concerns in general;
    adverse changes in tariffs and other protectionist laws and
    business practices that favor local competitors;
    longer collection periods and difficulties in collecting
    receivables from foreign entities;
    exposure to different legal standards and burdens of complying
    with a variety of foreign laws, including employment, tax,
    privacy and data protection laws and regulations;
    reduced protection for our intellectual property in some
    countries;
    expenses associated with localizing products for foreign
    countries, including translation into foreign languages; and
    import and export license requirements and restrictions of the
    United States and each other country in which we operate. 15




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We may
    not be able to sustain or increase profitability in the
    future.
    We
    face intense competition, and our failure to compete
    successfully could make it difficult for us to add and retain
    clients and could reduce or impede the growth of our
    business.
      
    companies currently providing customer service solutions, some
    of whom offer hosted services, including BMC Software
    Corporation, Inc., eGain Communications Corporation, Inquira
    Software, Inc., Kana Software, Inc., Liveperson, Microsoft
    Corporation, Moxie Software, Inc., Oracle Corporation, Parature,
    SAP AG, and salesforce.com;
    CRM systems that are developed and maintained internally by
    businesses;
    CRM products or services that are developed, or bundled with
    other products or services, and installed on a clients
    premises by software vendors;
    outsourced contact center providers that bundle solutions and
    agent labor in their service offerings;
    new companies entering the CRM software market, the on-demand
    applications market and the on-demand CRM market, or expanding
    from any one of these markets to the others;
    voice system integrators and voice-enabled IVR technology
    providers, such as Angel.com, Microsoft, and Voxify; and
    social CRM providers, such as Lithium and other niche social CRM
    providers.   16




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Our
    quarterly results of operations may fluctuate in the
    future.
    
    our ability to retain and increase sales to existing clients,
    attract new clients and satisfy our clients requirements;
    general economic, industry and market conditions;
    fluctuations in foreign currency exchange rates;
    the mix of revenue between subscription arrangements,
    professional services and license arrangements as sales
    commissions are generally expensed ratably over the term of an
    agreement for subscription services, and expensed when invoiced
    for license arrangements and professional services;
    changes in the mix of revenue between recurring revenue and
    professional services revenue, because the gross margin on
    professional services is typically lower than the gross margin
    on recurring revenue;
    changes in the mix of voice self-service applications sold
    and/or usage
    volume, because the gross margin on voice self-service
    applications is typically lower than the gross margin on our
    sales, marketing, feedback and service applications;
    the timing of contracts signed and amount of usage fees;
    the timing and success of new product introductions or upgrades
    by us or our competitors;
    the timing of professional service sales and our ability to
    appropriately staff and train professional service resources
    without negatively impacting professional service margins;
    changes in our pricing policies or those of our competitors;
    the amount and timing of expenditures related to expanding our
    operations;
    stock price volatility, employee exercise behaviors, and stock
    option or restricted stock unit forfeiture rates, or changes in
    the number of stock options or restricted stock units granted
    and vesting requirements in any particular period, which effects
    the amount of stock-based compensation expense;
    changes in the payment terms for our products and services,
    including changes in the mix of payment options chosen by our
    customers;
    the purchasing and budgeting cycles of our clients; and
    changes in tax rate affected by changes in the mix of earnings
    and losses in jurisdictions with differing statutory tax rates,
    certain non-deductible expenses arising from the requirement to
    expense stock options and the valuation of deferred tax assets
    and liabilities, including our ability to use our net operating
    losses. 17




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and/or
  quarter-to-quarter
  Failure
    to effectively develop and expand our sales and marketing
    capabilities could harm our ability to increase our client base
    and achieve broader market acceptance of our
    solutions.
    Most
    of our solutions are sold pursuant to time-based agreements, and
    if our existing clients elect not to renew or to renew on terms
    less favorable to us, our business, financial condition and
    results of operations will be adversely affected.
    We
    have experienced growth in recent periods. If we fail to manage
    our growth effectively, we may be unable to execute our business
    plan, maintain high levels of service or adequately address
    competitive challenges.
   18




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General
    economic conditions could adversely affect our clients
    ability or willingness to purchase our products, which could
    materially and adversely affect our results of
    operations.
      If
    there are interruptions or delays in our hosting services
    through third-party error, our own error or the occurrence of
    unforeseeable events, delivery of our solutions could become
    impaired, which could harm our relationships with clients and
    subject us to liability.
  back-up and/or
 19




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If the
    security of our clients confidential information contained
    in our systems or stored by use of our software is breached or
    otherwise subjected to unauthorized access, our hosting service
    or our software may be perceived as not being secure and clients
    may curtail or stop using our hosting service and our
    solutions.
    If we
    fail to respond effectively to rapidly changing technology and
    evolving industry standards, particularly in the on-demand CRM
    industry, our solutions may become less competitive or
    obsolete.
      Our
    failure to attract and retain qualified or key personnel may
    prevent us from effectively developing, marketing, selling,
    integrating and supporting our products.
   20




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Our
    failure to attract, manage, support and retain qualified
    partners may prevent us from effectively deploying product and
    professional services.
    If our
    solutions fail to perform properly or if they contain technical
    defects, our reputation will be harmed, our market share would
    decline and we could be subject to product liability
    claims.
        If we
    are unable to protect our intellectual property rights, our
    competitive position could be harmed or we could be required to
    incur significant expenses to enforce our rights.
   21




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Our
    product development efforts may be constrained by the
    intellectual property of others, and we may become subject to
    claims of intellectual property infringement, which could be
    costly and time-consuming.
      The
    market for our on-demand application services is not at the same
    stage of development as traditional on-premise enterprise
    software, and if it does not develop or develops more slowly
    than we expect, our business will be harmed.
   22




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
    on-demand security capabilities and reliability;
    concerns with entrusting a third party to store and manage
    critical customer data;
    the level of customization we offer;
    our ability to continue to achieve and maintain high levels of
    client satisfaction; and
    the price, performance and availability of competing products
    and services.    If our
    efforts to enhance existing solutions, introduce new solutions
    or expand the applications for our products and solutions to
    broader CRM markets do not succeed, our ability to grow our
    business will be adversely affected.
    Recently
    completed and/or future acquisitions could disrupt our business
    and harm our financial condition and results of
    operations.
    
    an acquisition may negatively impact our results of operations
    because it may require incurring large one-time charges,
    substantial debt or liabilities; it may require the amortization
    or write down of amounts related to deferred compensation,
    goodwill and other intangible assets; or it may cause adverse
    tax consequences, substantial depreciation or deferred
    compensation charges;
    we may encounter difficulties in assimilating and integrating
    the business, technologies, products, personnel or operations of
    companies that we acquire, particularly if key personnel of the
    acquired company decide not to work for us;
    our existing and potential clients and the customers of the
    acquired company may delay purchases due to uncertainty related
    to an acquisition;
    an acquisition may disrupt our ongoing business, divert
    resources, increase our expenses and distract our management;
    the acquired businesses, products or technologies may not
    generate sufficient revenue to offset acquisition costs and
    could result in material asset impairment charges; 23




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
    we may have to issue equity securities to complete an
    acquisition, which would dilute our stockholders and could
    adversely affect the market price of our common stock; and
    acquisitions may involve the entry into a geographic or business
    market in which we have little or no prior experience.    Changes
    to financial accounting standards may affect our results of
    operations and financial condition.
    We may
    not be able to secure additional financing on favorable terms,
    or at all, to meet our future capital needs.
    Our
    debt service obligations may adversely affect our financial
    condition and cash flows from operations.
      
    it may impair our ability to obtain additional financing in the
    future;
    an increased portion of our cash flows from operations may have
    to be dedicated towards making semi-annual interest payments and
    repaying the principal in 2015;
    it may make us more vulnerable to downturns in our business, our
    industry or the economy in general.   24




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We may
    issue additional shares of our common stock or instruments
    convertible into shares of our common stock, including
    additional shares associated with the potential conversion of
    the Notes, and thereby materially and adversely affect the
    market price of our common stock and the trading price of the
    Notes and cause dilution to existing stockholders.
      We may
    not have the ability to raise the funds necessary to repurchase
    the Notes upon a fundamental change or at the option of the
    holders of the Notes on certain dates.
    The
    fundamental change provisions in the Notes may delay or prevent
    an otherwise beneficial takeover attempt of us.
    We
    cannot assure our stockholders that our stock repurchase program
    will enhance long-term stockholder value and stock repurchases,
    if any, could increase the volatility of the price of our common
    stock and will diminish our cash reserves.
   25




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The
    success of our products and our hosted business depends on the
    continued use of the internet as a business and communications
    tool, and the related expansion of the internet
    infrastructure.
        Privacy
    concerns and laws or other domestic or foreign regulations may
    adversely affect our business or reduce sales of our
    solutions.
    and/or
 26




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The
    significant influence over stockholder voting matters and our
    office leases that may be exercised by our founder and Chief
    Executive Officer will limit your ability to influence corporate
    actions and may require us to find alternative office space to
    lease or buy in the future.
      Anti-takeover
    provisions in our charter documents and Delaware law could
    discourage, delay or prevent a change in control of our company
    and may affect the trading price of our common
    stock.
    
    establishing a classified board in which only a portion of the
    total board members will be elected at each annual meeting;
    authorizing the board to issue preferred stock;
    providing the board with sole authority to set the number of
    authorized directors and to fill vacancies on the board;
    limiting the persons who may call special meetings of
    stockholders;
    prohibiting certain transactions under certain circumstances
    with interested stockholders;
    requiring supermajority approval to amend certain provisions of
    the certificate of incorporation; and
    prohibiting stockholder action by written consent.   27




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Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings   28




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Item 4.
    (Removed
    and Reserved). Part II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder
    Matters, and Issuer Purchases of Securities    COMPARISON
    OF 5-YEAR
    CUMULATIVE TOTAL RETURN AMONG
    RIGHTNOW TECHNOLOGIES, INC., NASDAQ MARKET INDEX AND
    PREPACKAGED SOFTWARE
  
  (PERFORMANCE
    GRAPH)
    ASSUMES $100 INVESTED ON DEC. 31, 2005
    ASSUMES DIVIDEND REINVESTED
    FISCAL YEAR ENDING DEC. 31, 2010
     29




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Market
    Information for Common Stock
    Quarter Ended

Mar 31

June 30

Sept 30

Dec 31Year ended December 31, 2009Common stock price per share:High

$
9.00


$
11.86


$
14.63


$
17.89Low


5.84



7.00



10.69



13.65Year ended December 31, 2010Common stock price per share:High

$
17.88


$
19.92


$
19.70


$
27.76Low


14.29



13.55



14.54



19.42   Holders
    Dividends
    Unregistered
    Sales of Equity Securities
    Use of
    Proceeds from Sales of Registered Securities
  Form S-1 No. 333-115331)
   30




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Purchases
    of Equity Securities by the Issuer or Affiliated
    Purchasers
  and/or Rule 10b-18
    Approximate DollarTotal Number of Shares


Value of Shares thatPurchased as Part of


may Yet be PurchasedTotal Number of


Avg. Price Paid


Publicly Announced


Under the RepurchaseFiscal Year 2010

Shares Purchased


Per Share


Repurchase Program


ProgramNovember
    19-30


50


$
24.56



50


$
23,767December 1-30


531



24.31



531



12,910Total Fiscal Year 2010


581


$
24.33



581


$
10,857   Item 6.
    Selected
    Consolidated Financial Data    Year Ended December 31,2006


2007


2008


2009


2010(In thousands, except per share data)Consolidated Statements of Operations Data:Revenue:Recurring revenue

$
86,257


$
86,983


$
102,576


$
115,395


$
147,345Professional services


24,131



25,094



37,859



37,292



38,177Total revenue


110,388



112,077



140,435



152,687



185,522Cost of revenue:Recurring revenue


13,260



18,411



20,397



20,948



23,609Professional services


19,110



22,012



30,440



26,610



31,453Total cost of revenue


32,370



40,423



50,837



47,558



55,062Gross profit


78,018



71,654



89,598



105,129



130,460 31




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##### Table of Contents



Year Ended December 31,2006


2007


2008


2009


2010(In thousands, except per share data)Operating expenses:Sales and marketing


61,504



65,118



67,628



64,751



79,395Research and development


14,478



17,084



18,292



20,221



20,154General and administrative


9,578



11,500



13,615



15,801



18,706Total operating expenses


85,560



93,702



99,535



100,773



118,255Income (loss) from operations


(7,542
)


(22,048
)


(9,937
)


4,356



12,205Interest and other income, net


3,064



3,683



2,696



2,094



345Income (loss) before income taxes


(4,478
)


(18,365
)


(7,241
)


6,450



12,550Benefit (provision) for income taxes


(530
)


(276
)


(42
)


(579
)


15,840Net income (loss)


(5,008
)


(18,641
)


(7,283
)


5,871



28,390Net income (loss) per share(1):Basic

$
(0.16
)

$
(0.56
)

$
(0.22
)

$
0.18


$
0.88Diluted


(0.16
)


(0.56
)


(0.22
)


0.18



0.83Shares used in the computation(1):Basic


32,241



33,078



33,362



31,752



32,156Diluted


32,241



33,078



33,362



32,336



34,568     (1)
    
    See Note 1, (q) Net Income (Loss) per Share in our Notes to
    Consolidated Financial Statements for an explanation of the
    calculation of basic and diluted income (loss) per share and for
    an explanation of the determination of the number of weighted
    average shares used for such calculations.  December 31,2006

2007

2008

2009

2010(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents

$
39,208


$
43,681


$
51,405


$
41,546


$
181,948Short-term investments


39,127



52,644



34,412



54,977



94,759Long-term investments










4,963







Working capital


50,374



45,063



34,075



26,235



206,592Total assets


178,242



173,786



162,337



164,435



378,879Deferred revenue


114,578



114,660



113,198



101,327



93,319Long-term debt, less current portion


85



68



22







175,000Total stockholders equity


47,474



38,181



27,183



40,242



79,597   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Cautionary
    Statement
  The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with the financial statements and related notes in
    this report. This discussion contains forward-looking statements
    that involve risks and uncertainties. These forward-looking
    statements are based on our current expectations, estimates and
    projections about our industry, managements beliefs, and
    certain assumptions made by us, all of which are subject to
    change. Forward-looking statements can often be identified by
    words such as anticipates, expects,
    intends, plans, predicts,
    believes, seeks, estimates,
    may, will, should,
    would, could, potential,
    continue, ongoing, similar expressions,
    and variations or negatives of these words and include, but are
    not limited to, statements regarding projected results of
    operations and managements future strategic plans. Our
    actual results could differ significantly from those projected
    in the forward-looking statements as a result of factors,
    including those
 32




---



##### Table of Contents



discussed under Risk Factors and elsewhere in
    this report. We assume no obligation to update the
    forward-looking statements or such risk factors.
  Overview
  tune-ups,
  tm tm tm tm tm
  Sources
    of Revenue
     33




---



##### Table of Contents



Cost
    of Revenue and Operating Expenses
  Cost of Revenue.
  Sales and Marketing Expenses.
  Research and Development Expenses.
  General and Administrative Expenses.
 34




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
  and/or
  Revenue
    Recognition
  Industry
    Topic 985, Software
  2009-13, Revenue Arrangements with Multiple Deliverables
    (ASU
    2009-13 ASU
    2009-13 Topic
    605-25 Multiple-Element Arrangements, ASU
    2009-13
  Industry Topic 985, Software.
   35




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##### Table of Contents



Allowance
    for doubtful accounts
    Income
    Taxes
    Topic 740, Income Taxes, Topic 740
    Share-Based
    Compensation
  Topic 718, Compensation-Stock Compensation,
  Software
    Capitalization
  Topic 350, Intangibles  Goodwill and Other,
 36




---



##### Table of Contents



Recently
    Issued Accounting Standards
    Results
    of Operations
    Year EndedDecember 31,2008

2009

2010Revenue:Recurring revenue


73
%


76
%


79
%Professional services


27



24



21Total revenue


100



100



100Cost of revenue:Recurring revenue


14



14



13Professional services


22



17



17Total cost of revenue


36



31



30Gross profit


64



69



70Operating expenses:Sales and marketing


48



43



43Research and development


13



13



10General and administrative


10



10



10Total operating expenses


71



66



63Income (loss) from operations


(7
)


3



7Interest and other income, net


2



1



0Income (loss) before income taxes


(5
)


4



7Benefit (provision) for income taxes


0



0



8Net income (loss)


(5
)%


4
%


15
%  37




---



##### Table of Contents



Year Ended December 31,2008

2009

2010Customer interactions (in millions)


2,099



2,494



3,163Revenue by type:Recurring (subscriptions, term licenses, hosting and support)


73
%


76
%


79
%Professional services


27



24



21Revenue by geography in:North America


69
%


73
%


69
%Europe


23



19



19Asia Pacific


8



8



12   Overview
    of 2010
           38




---



##### Table of Contents



Years
    Ended December 31, 2008, 2009 and 2010
  Revenue
  Year Ended December 31,Percent





Percent2008


2009


Change


2010


Change(Amounts in thousands)Recurring revenue

$
102,576


$
115,395



12
%

$
147,345



28
%Professional services


37,859



37,292



(1.5
)


38,177



2Total revenue

$
140,435


$
152,687



9
%

$
185,522



22
%      39




---



##### Table of Contents



period-to-period
  Cost
    of Revenue
  Year Ended December 31,Percent





Percent2008


2009


Change


2010


Change(Amounts in thousands)Recurring revenue

$
20,397


$
20,948



3
%

$
23,609



13
%Professional services


30,440



26,610



(13
)


31,453



18Total cost of revenue

$
50,837


$
47,558



(6
)%

$
55,062



16
%      40




---



##### Table of Contents



sub-contractor
       41




---



##### Table of Contents



Operating
    Expenses
  Year Ended December 31,Percent





Percent2008


2009


Change


2010


Change(Amounts in thousands)Sales and marketing

$
67,628


$
64,751



(4
)%

$
79,395



23
%Research and development


18,292



20,221



11



20,154



0General and administrative


13,615



15,801



16



18,706



18Total operating expenses

$
99,535


$
100,773



1
%

$
118,255



17
%   Sales and
    Marketing Expenses
          Research
    and Development Expenses
   42




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##### Table of Contents



General
    and Administrative Expenses
      Stock-Based
    Compensation Expense
  period-to-period
  Interest
    and Other Income, Net
  Year Ended December 31,Percent





Percent2008


2009


Change


2010


Change(Amounts in thousands)Interest income

$
2,906


$
1,023



(65
)%

$
585



(43
)%Interest expense


(12
)


(7
)


n/m



(474
)


6,671Other income (expense)


(198
)


1,078



n/m



234



(78
)Total interest and other income, net

$
2,696


$
2,094



(22
)%

$
345



(84
)%      43




---



##### Table of Contents



Benefit
    (Provision) for Income Taxes
        Topic 718
  Liquidity
    and Capital Resources
  Year Ended December 31,Percent



Percent2008

2009

Change

2010

Change(Amounts in thousands)Cash, cash equivalents and short-term investments

$
85,817


$
96,523



12
%

$
276,707



187
%Long-term investments


4,963







(100
)






n/aCash provided by operating activities


14,724



16,097



9
%


18,494



15
%    44




---



##### Table of Contents



30-day year-to-year
               45




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
  Regulation S-K
  Contractual
    Obligations and Commitments
    Payments Due by PeriodLess than








More thanContractual Obligations

Total


1 Year


1-3 Years


3-5 Years


5 Years(In thousands)Operating lease obligations

$
15,459


$
4,571


$
8,393


$
2,421


$
74Obligations under capital leases


















Purchase obligations  hosting services


3,166



2,053



1,113







Purchase obligations  other


1,861



1,252



609







Interest obligation on 2.50% Convertible senior notes


22,349



4,849



8,750



8,7502.50% Convertible senior notes due 2030 (callable
    Nov. 15, 2015)


175,000











175,000



Total

$
217,835


$
12,725


$
18,865


$
186,171


$
74         Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Foreign
    Currency Exchange Risk
     46




---



##### Table of Contents



Interest
    Rate Sensitivity
    Item 8.
    Financial
    Statements and Supplementary Data    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  (a)
    Evaluation
    of Disclosure Controls and Procedures  Rules 13a-15(e) 15d-15(e)
 47




---



##### Table of Contents



(b)
    Changes
    to Internal Control over Financial Reporting  Rules 13a-15(f) 15d-15(f)
  Report of
    Management on Internal Control Over Financial
    Reporting
  15d-15(f).
  Internal Control  Integrated Framework
 48




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
    Internal Control 
    Integrated Framework
        Internal Control  Integrated
    Framework
    KPMG
    LLP
    49




---



##### Table of Contents



Item 9B.
    Other
    Information   Part III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  (a)
    Identification
    of Directors.    (b)
    Identification
    of Executive Officers and Certain Significant
    Employees.    (c)
    Compliance
    with Section 16(a) of the Exchange Act.    (d)
    Code of
    Ethics.  http://www.rightnow.com
  (e)
    Corporate
    Governance.    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   50




---



##### 



Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence  (a)
    Certain
    Relationships and Related Transactions.    (b)
    Director
    Independence.    Item 14.
    Principal
    Accounting Fees and Services   Part IV  Item 15.
    Exhibits,
    Financial Statement Schedules  (a)(1)  Financial
    Statements
   
 PageReport of Independent Registered Public
    Accounting Firm


F-1Consolidated Financial Statements:Balance Sheets


F-2Statements of Operations


F-3Statements of Stockholders Equity and
    Comprehensive Income (Loss)


F-4Statements of Cash Flows


F-5Notes


F-6    (a)(2)  Financial
    Statement Schedules
  Regulation S-X
  (a)(3)  Exhibits
    ExhibitNumber

Description of Document3
.1

Amended and restated certificate of incorporation of the
    registrant.(1)3
.2

Amended and restated bylaws of the registrant.(4)4
.1

Indenture between the registrant and The Bank of New York Mellon
    Trust Company, N.A., dated as of November 22, 2010,
    including the form of 2.50% Convertible Senior Note due
    2030 (included as Exhibit A to the Indenture).(19)10
.1

Form of indemnification agreement between the registrant and its
    officers and directors.(2)10
.2

Amended and restated 1998 Long-Term Incentive and Stock Option
    Plan.(2)10
.3

2004 Equity Incentive Plan, as amended and restated.(21)10
.4

2004 Employee Stock Purchase Plan, as amended and restated.(15) 51




---



##### Table of Contents



ExhibitNumber

Description of Document10
.5

Lease agreement dated July 10, 2000, between Genesis
    Partners, LLC and the registrant (relating to property at 40
    Enterprise Blvd, Bozeman, MT).(2)10
.6

Lease agreement dated July 10, 2000, between Genesis
    Partners, LLC and the registrant (relating to property at 77
    Discovery Drive, Bozeman, MT).(2)10
.7

Severance policy for executive officers.(2)10
.8

Form of executive officer offer letter and schedule of omitted
    material details thereto.(2)10
.9

Form of executive officer incentive stock option agreement and
    schedule of omitted material details thereto.(2)10
.10

Form of executive officer non-incentive stock option agreement
    and schedule of omitted material details thereto.(2)10
.11

Form of director non-incentive stock option agreement and
    schedule of omitted material details thereto.(2)10
.12

Form of Notice of Grant of Stock Options and Stock Option
    Agreements.(5)10
.13

Form of Incentive Stock Option Agreement.(6)10
.14

Form of Non-Incentive Stock Option Agreement.(6)10
.15

Lease agreement dated March 28, 2005, between the
    registrant and Genesis Partners, LLC for office space located at
    110 Enterprise Boulevard, Bozeman, Montana.(3)10
.16

Renewed lease agreement, dated March 28, 2005, between the
    registrant and Genesis Partners, LLC for office space located at
    77 Discovery Drive, Bozeman, Montana.(3)10
.17

Form of amended employment offer letter for executive
    officers.(7)10
.18

Lease agreement, dated November 1, 2005 and commencing
    March 23, 2007, between the registrant and Genesis
    Partners, LLC for office space located at 136 Enterprise
    Boulevard, Bozeman, Montana.(8)10
.19

Form of offer letter for Jason Mittelstaedt, Joseph Brown, Steve
    Daines, and Michael Saracini, and schedule of omitted material
    details thereto.(9)10
.20

Form of executive officer offer letter and schedule of material
    differences thereto for Jeff Davison and Susan Carstensen.(10)10
.21

Offer letter with Marcus Bragg, VP and GM of the Americas.(11)10
.22

Terms of understanding with Michael Saracini, Former VP and GM
    of Americas.(12)10
.23

Renewed lease agreement, dated February 16, 2010, between
    the registrant and Genesis Partners, LLC for office space
    located at 77 Discovery Drive, Bozeman, Montana.(22)10
.24

Renewed lease agreement, dated February 16, 2010, between
    the registrant and Genesis Partners, LLC for office space
    located at 110 Enterprise Boulevard, Bozeman, Montana.(23)10
.25

Form of Restricted Stock Unit Award Agreement for Directors.(13)10
.26

Offer letter with Wayne Huyard, President and Chief Operating
    Officer.(14)10
.27

Renewed lease agreement dated February 7, 2011, between the
    registrant and Genesis Partners, LLC for office space located at
    40 Enterprise Boulevard, Bozeman, Montana.(16)10
.28

Renewed lease agreement dated February 7, 2011, between the
    registrant and Genesis Partners, LLC for office space located at
    77 Discovery Drive, Bozeman, Montana.(17)10
.29

Amended lease agreement dated February 7, 2011, between the
    registrant and Genesis Partners, LLC for office space located at
    136 Enterprise Boulevard, Bozeman, Montana.(18)10
.30

Purchase Agreement dated November 16, 2010 between the
    registrant and Credit Suisse Securities (USA) LLC, as
    representative of the several initial purchasers named in
    Schedule A thereto.(20)21
.1

Subsidiaries of the registrant.23
.1

Consent of KPMG LLP, Independent Registered Public Accounting
    Firm.31
.1

Certification of Chief Executive Officer pursuant to Exchange
    Act
    Rule 13a-14(a)
    or 15d-14(a) as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002. 52




---



##### Table of Contents



ExhibitNumber

Description of Document31
.2

Certification of Chief Financial Officer pursuant to Exchange
    Act
    Rule 13a-14(a)
    or 15d-14(a) as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.32
.1

Certifications of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    (furnished herewith).     (1)
    
    Incorporated by reference to Exhibit 4.2 of the
    registrants registration statement on
    Form S-8
    (File
    No. 333-118515)
    filed with the Securities and Exchange Commission on
    August 24, 2004.(2)
    
    Incorporated by reference to the exhibit of the same number from
    the registrants registration statement of
    Form S-1
    (File
    No. 333-115331)
    initially filed with the Securities and Exchange Commission on
    May 10, 2004, as amended.(3)
    
    Incorporated by reference to the exhibit of the same number from
    the registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    April 1, 2005.(4)
    
    Incorporated by reference to Exhibit 3.1 of the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    January 25, 2006.(5)
    
    Incorporated by reference to Exhibits 10.13, 10.14 and
    10.15 of the registrants annual report on
    Form 10-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on filed on
    March 31, 2005.(6)
    
    Incorporated by reference to Exhibits 10.20 and 10.21,
    respectively, of the registrants quarterly report on
    Form 10-Q
    (File No.
    000-31321)
    filed with the Securities and Exchange Commission on
    May 10, 2006.(7)
    
    Incorporated by reference to the exhibit of the same number from
    the registrants annual report on
    Form 10-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    March 14, 2007.(8)
    
    Incorporated by reference to the exhibit of the same number from
    the registrants quarterly report on
    Form 10-Q
    filed (File
    No. 000-31321)
    with the Securities and Exchange Commission on May 8, 2007.(9)
    
    Incorporated by reference to Exhibit 10.30 of the
    registrants quarterly report on
    Form 10-Q
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    August 9, 2007.(10)
    
    Incorporated by reference to Exhibit 10.31 of the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    January 30, 2008.(11)
    
    Incorporated by reference to Exhibit 10.1 of the
    registrants quarterly report on
    Form 10-Q
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    November 7, 2008.(12)
    
    Incorporated by reference to Exhibit 10.2 of the
    registrants quarterly report on
    Form 10-Q
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    November 7, 2008.(13)
    
    Incorporated by reference to Exhibit 10.1 to the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    June 9, 2010.(14)
    
    Incorporated by reference to Exhibit 10.1 of the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    October 12, 2010.(15)
    
    Incorporated by reference to Exhibit 10.1 of the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    December 9, 2010.(16)
    
    Incorporated by reference to Exhibit 10.1 of the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    February 9, 2011.(17)
    
    Incorporated by reference to Exhibit 10.2 of the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    February 9, 2011.(18)
    
    Incorporated by reference to Exhibit 10.3 of the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    February 9, 2011.(19)
    
    Incorporated by reference to Exhibit 4.1 of the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    November 22, 2010. 53




---



##### Table of Contents



(20)
    
    Incorporated by reference to Exhibit 10.1 of the
    registrants current report on
    Form 8-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on
    November 22, 2010.(21)
    
    Incorporated by reference to Exhibit 10.3 of the
    registrants annual report on
    Form 10-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on filed on
    March 9, 2010.(22)
    
    Incorporated by reference to Exhibit 10.23 of the
    registrants annual report on
    Form 10-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on filed on
    March 9, 2010.(23)
    
    Incorporated by reference to Exhibit 10.24 of the
    registrants annual report on
    Form 10-K
    (File
    No. 000-31321)
    filed with the Securities and Exchange Commission on filed on
    March 9, 2010.
    
    Denotes management contract or compensatory plan or arrangement.  (b)
    Exhibits  The exhibits filed as part of this report are listed in
    Item 15(a)(3) of this report.
  (c)
    Financial
    Statement Schedules  Regulation S-X
 54




---



##### Table of Contents



Signatures      By:
    /s/  JEFFREY
    C. DAVISON          Signature

Title/s/  GREG
    R. GIANFORTEGreg
    R. Gianforte

Chairman and Chief Executive Officer 
    (Principal Executive Officer)/s/  JEFFREY
    C. DAVISONJeffrey
    C. Davison

Chief Financial Officer, Senior Vice President and Treasurer
    (Principal Financial and Accounting Officer)/s/  RICHARD
    E. ALLENRichard
    E. Allen

Director/s/  GREGORY
    M. AVISGregory
    M. Avis

Director/s/  THOMAS
    W. KENDRAThomas
    W. Kendra

Director/s/  WILLIAM
    J. LANSINGWilliam
    J. Lansing

Director/s/  STEVEN
    S. SINGHSteven
    S. Singh

Director/s/  ALLEN
    E. SNYDERAllen
    E. Snyder

Director  55




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm          Internal Control 
    Integrated Framework
  KPMG
    LLP
    F-1




---



##### Table of Contents



RIGHTNOW
    TECHNOLOGIES, INC.



Consolidated
    Balance Sheets

(In
    thousands)  December 31,2009


2010(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
41,546


$
181,948Short-term investments


54,977



94,759Accounts receivable


34,267



39,338Less allowance for doubtful accounts


(1,914
)


(2,021
)Total current receivables, net


32,353



37,317Deferred commissions


6,394



5,418Prepaid and other current assets


2,434



4,662Deferred tax assets, net






3,801Total current assets


137,704



327,905Property and equipment, net


10,122



10,702Intangible assets, net


11,141



14,124Deferred commissions, non-current


3,461



4,747Other assets


2,007



4,921Deferred tax assets, non-current, net






16,480Total Assets

$
164,435


$
378,879LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
5,427


$
10,463Commissions and bonuses payable


6,271



7,137Other accrued liabilities


11,146



13,363Current portion of long-term debt


22



Current portion of deferred revenue


88,603



90,350Total current liabilities


111,469



121,313Deferred revenue, net of current portion


12,724



2,9692.50% Convertible senior notes due 2030






175,000Total liabilities


124,193



299,282Stockholders equity:Preferred stock, $0.001 par value. Authorized and
    undesignated 15,000 shares at December 31, 2009, and
    2010, respectively






Common stock, $0.001 par value. Authorized
    150,000 shares; issued and outstanding 33,992 and
    31,879 shares at December 31, 2009; issued and
    outstanding 35,074 and 32,380 respectively at December 31,
    2010


34



35Additional paid-in capital


112,439



136,717Treasury Stock, at cost. 2,113 shares and 2,694 shares
    at December 31, 2009 and 2010, respectively


(15,007
)


(29,149
)Accumulated other comprehensive income


1,125



1,953Accumulated deficit


(58,349
)


(29,959
)Total stockholders equity


40,242



79,597Total Liabilities and Stockholders Equity

$
164,435


$
378,879    F-2




---



##### Table of Contents



RIGHTNOW
    TECHNOLOGIES, INC.



Consolidated
    Statements of Operations  Year Ended December 31,2008


2009


2010(In thousands, except per share data)Revenue:Recurring revenue

$
102,576


$
115,395


$
147,345Professional services


37,859



37,292



38,177Total revenue


140,435



152,687



185,522Costs of revenue:Recurring revenue


20,397



20,948



23,609Professional services


30,440



26,610



31,453Total cost of revenue


50,837



47,558



55,062Gross profit


89,598



105,129



130,460Operating expenses:Sales and marketing


67,628



64,751



79,395Research and development


18,292



20,221



20,154General and administrative


13,615



15,801



18,706Total operating expenses


99,535



100,773



118,255Income (loss) from operations


(9,937
)


4,356



12,205Interest and other income (expense):Interest income


2,906



1,023



585Interest expense


(12
)


(7
)


(474
)Other


(198
)


1,078



234Total interest and other income, net


2,696



2,094



345Income (loss) before provision for income taxes


(7,241
)


6,450



12,550Benefit (provision) for income taxes


(42
)


(579
)


15,840Net income (loss)

$
(7,283
)

$
5,871


$
28,390Net income (loss) per share:Basic

$
(0.22
)

$
0.18


$
0.88Diluted

$
(0.22
)

$
0.18


$
0.83Shares used in the computation:Basic


33,362



31,752



32,156Diluted


33,362



32,336



34,568    F-3




---



##### Table of Contents



RIGHTNOW
    TECHNOLOGIES, INC.



Consolidated
    Statements of Stockholders Equity and Comprehensive Income
    (Loss)  AccumulatedAdditional


Other





TotalCommon Stock


Treasury Stock


Paid-in


Comprehensive


Accumulated


StockholdersShares


Amount


Shares


Amount


Capital


Income (Loss)


Deficit


Equity(Amount in thousands)Balance at December 31, 2007


33,453



33











95,377



(292
)


(56,937
)


38,181Issuance of common stock:Exercise of stock options


236



1











1,176











1,177Employee stock purchase plan


23















219











219Stock-based compensation expense


















6,025











6,025Tax benefit of stock option exercises


















(135
)










(135
)Treasury Stock, at cost










1,882



(13,209
)














(13,209
)Comprehensive loss:Net loss


























(7,283
)


(7,283
)Unrealized gain on available for sale investments net of tax of
    $0






















242







242Foreign currency translation adjustment






















1,966







1,966Total comprehensive loss






























(5,075
)Balance at December 31, 2008


33,712



34



1,882



(13,209
)


102,662



1,916



(64,220
)


27,183Issuance of common stock:Exercise of stock options


261















1,497











1,497Employee stock purchase plan


19















251











251Stock-based compensation expense


















7,786











7,786Tax benefit of stock option exercises


















243











243Treasury Stock, at cost










231



(1,798
)














(1,798
)Comprehensive income:Net income


























5,871



5,871Unrealized gain on available for sale investments net of tax of
    $0






















11







11Foreign currency translation adjustment






















(802
)






(802
)Total comprehensive income






























5,080Balance at December 31, 2009


33,992


$
34



2,113



(15,007
)

$
112,439


$
1,125


$
(58,349
)

$
40,242Issuance of common stock:Exercise of stock options


1,068



1











12,570











12,571Employee stock purchase plan


14















250











250Stock-based compensation expense


















7,854











7,854Tax benefit of stock option exercises


















3,604











3,604Treasury Stock, at cost










581



(14,142
)














(14,142
)Comprehensive income:Net income


























28,390



28,390Unrealized loss on available for sale investments net of tax of
    $0






















(19
)






(19
)Foreign currency translation adjustment net of tax benefit of
    $526






















847







847Total comprehensive income






























29,218Balance at December 31, 2010


35,074


$
35



2,694



(29,149
)

$
136,717


$
1,953


$
(29,959
)

$
79,597    F-4




---



##### Table of Contents



RIGHTNOW
    TECHNOLOGIES, INC.



Consolidated
    Statements of Cash Flows  2008


2009


2010(Amounts in thousands)Operating activities:Net income (loss)

$
(7,283
)

$
5,871


$
28,390Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depreciation and amortization


7,771



7,491



7,772Stock-based compensation


6,025



7,786



7,854Provision for losses on accounts receivable


212



157



191Benefit for deferred tax asset valuation allowance reversal










(19,732
)Changes in operating assets and liabilities (net of assets
    acquired):Receivables


4,774



11,255



(4,029
)Prepaid and other current assets


(101
)


(209
)


(948
)Deferred commissions


(3,623
)


(1,282
)


(314
)Accounts payable


895



238



4,997Commissions and bonuses payable


930



451



877Other accrued liabilities


462



(424
)


2,122Deferred revenue


4,169



(14,916
)


(8,388
)Other


493



(321
)


(298
)Net cash provided by operating activities


14,724



16,097



18,494Investing activities:Purchases of investments


(47,908
)


(69,952
)


(105,268
)Sales or maturities of investments


61,339



54,119



65,455Purchase of property and equipment


(5,759
)


(5,577
)


(6,708
)Business acquisitions, net of cash acquired






(5,906
)


Intangible asset additions


(33
)


(654
)


(4,560
)Net cash provided by (used in) investing activities


7,639



(27,970
)


(51,081
)Financing activities:Convertible senior notes issuance costs










(5,038
)Proceeds from issuance of convertible senior notes










175,000Purchase of treasury stock


(13,209
)


(1,798
)


(14,142
)Proceeds from issuance of common stock:Exercise of stock options and warrants


1,177



1,497



12,571Employee stock purchase plan


219



251



250Excess (shortfall) tax benefit of stock options exercised


(135
)


243



3,604Payments on long-term debt


(43
)


(46
)


(22
)Net cash provided by (used in) financing activities


(11,991
)


147



172,223Effect of foreign exchange rates on cash and cash equivalents


(2,648
)


1,867



766Net change in cash and cash equivalents


7,724



(9,859
)


140,402Cash and cash equivalents at beginning of period


43,681



51,405



41,546Cash and cash equivalents at end of period

$
51,405


$
41,546


$
181,948    F-5




---



##### Table of Contents



RIGHTNOW
    TECHNOLOGIES, INC.



Notes to
    Consolidated Financial Statements

Years
    ended December 31, 2008, 2009 and 2010  (1)
    Business
    Description and Summary of Significant Accounting
    Policies  (a)  Business
    Description
  tm
  (b)  Basis
    of Consolidation
    (c)  Reclassification
    (d)  Certain
    Risks and Concentrations
       F-6




---



##### Table of Contents



Year Ended December 31,2008


2009


2010North America

$
97,640


$
110,814


$
128,072Europe


31,946



28,544



35,700Asia Pacific


10,849



13,329



21,750$
140,435


$
152,687


$
185,522   (e)  Use
    of Estimates
  and/or
  (f)  Cash
    Equivalents
    (g)  Short-Term
    Investments
  available-for-sale other-than-temporary
  available-for-sale other-than-temporary
 F-7




---



##### Table of Contents



(h)  Accounts
    Receivable and Term Receivables
      and/or
  Year Ended December 31,2008


2009


2010Balance, beginning of year

$
1,918


$
2,277


$
1,914Provision charged to expense


212



157



191Provision charged against deferred revenue


1,515



1,158



1,087Write-downs charged against the allowance


(1,399
)


(2,160
)


(1,312
)Recoveries of amounts previously charged-off


31



482



141Balance, end of year

$
2,277


$
1,914


$
2,021   (i)  Property
    and Equipment
    (j)  Intangible
    Assets
    (k)  Revenue
    Recognition
  ASU
    2009-13,
    Revenue Arrangements with Multiple Deliverables
    (ASU
    2009-13), Industry Topic 985, Software,
 F-8




---



##### Table of Contents



Industry Topic
    985
    Financial
    Accounting Standards Board (FASB) Accounting
    Standards Update
    2009-13,
    Revenue Arrangements with Multiple Deliverables ASU
    2009-13 Topic
    605-25,
    Multiple-Element Arrangements ASU
    2009-13
    Industry Topic
    985
         F-9




---



##### Table of Contents



Year EndedDecember 31,2008

2009

2010Revenue by type:Recurring revenue


73
%


76
%


79
%Professional services


27



24



21100
%


100
%


100
%     (l)  Sales
    Incentives
    (m)  Research
    and Development
    (n)  Internal
    Use Software
  Topic 350, Intangibles  Goodwill and Other,
 F-10




---



##### Table of Contents



(o)  Income
    Taxes
  Topic 740, Income Taxes.
  Topic 740, Income
    Taxes
    (p)  Impairment
    of Long-Lived Assets
    (q)  Net
    Income (Loss) Per Share
    Year Ended December 31,2008

2009

2010Weighted average common shares outstanding for basic net income
    (loss) per share


33,362



31,752



32,156Employee stock options






584



1,826If converted, share conversion of convertible senior
    notes










586Weighted average shares outstanding for dilutive net income
    (loss) per share


33,362



32,336



34,568  F-11




---



##### Table of Contents



Year Ended December 31,2008

2009

2010Employee stock options


4,428



5,363



4,397   (r)  Stock-Based
    Compensation
  Topic
    718, Compensation-Stock Compensation. Topic
    718 Topic 718
  Topic 718 Topic 718
  (s)  Foreign
    Currency Translation
  non-U.S. operations,
  (t)  Comprehensive
    Income (Loss)
    (u)  Advertising
    Costs
   F-12




---



##### Table of Contents



(2)
    Acquisition      Cash consideration

$
5,906Total purchase price

$
5,906Purchase price allocation:Net assets assumed

$
189Intangible assets


5,717Total purchase price

$
5,906     Goodwill

$
3,617Developed technology


1,800Customer relationships


200Trade name and trademarks


100Intangible assets

$
5,717     (3)
    Supplemental
    Cash Flow Information    Year EndedDecember 31,2008

2009

2010Supplemental disclosure of cash flow information:Cash paid during the period for:Interest

$
12


$
7


$
Income taxes


28



262



230  F-13




---



##### Table of Contents



(4)
    Cash
    Equivalents, Short and Long-Term Investments, and Fair
    Value    Fair





Short-Unrealized


Market


Cash


TermDecember 31, 2009

Cost


Gains


Losses


Value


Equivalents


InvestmentsCash equivalents:Money market funds

$
15,655


$



$



$
15,655


$
15,655


$
Commercial paper


1,400











1,400



1,400



Fixed maturity securities:Certificates of deposit


738











738







738Commercial paper


5,597











5,597







5,597Corporate notes and bonds


3,274



5







3,279







3,279U.S. Government agency securities


41,309



39



(29
)


41,319







41,319State and municipal securities


248







(1
)


247







247Auction rate state and municipal securities


3,800







(275
)


3,525







3,525Auction rate settlement agreement:Repurchase put option






272







272







272Totals at December 31, 2009

$
72,021



316



(305
)

$
72,032


$
17,055


$
54,977   Fair





Short-Unrealized


Market


Cash


TermDecember 31, 2010

Cost


Gains


Losses


Value


Equivalents


InvestmentsCash equivalents:Money market funds

$
12,064


$



$



$
12,064


$
12,064


$
Commercial paper


27,946











27,946



27,946



Fixed maturity securities:Certificates of deposit


2,988











2,988



1,743



1,245Corporate notes and bonds


13,502



1



(3
)


13,500



4,735



8,765U.S. Government agency securities


77,452







(13
)


77,439







77,439State and municipal securities


7,313







(3
)


7,310







7,310Totals at December 31, 2010

$
141,265



1



(19
)

$
141,247


$
46,488


$
94,759   available-for-sale
  Topic 820, Fair Value Measurements
    and Disclosures. Topic 820 Topic
    820 Topic 820
    
    Level 1  Quoted prices in active markets for
    identical assets or liabilities.
    Level 2  Inputs other than Level 1 that are
    observable, either directly or indirectly, such as quoted prices
    for similar assets or liabilities; quoted prices in markets that
    are not active; or other inputs that F-14




---



##### Table of Contents




    Level 3  Unobservable inputs that are supported
    by little or no market activity and that are significant to the
    fair value of the assets or liabilities.    Level 1


Level 2


Level 3


TotalCash

$
135,460


$



$



$
135,460Money market funds


12,064











12,064Certificates of deposit


2,988











2,988Commercial paper






27,946







27,946Corporate notes and bonds






13,500







13,500U.S. Government agency securities






77,439







77,439State and municipal securities






7,310







7,310$
150,512


$
126,195


$



$
276,707     Fair value at December 31, 2008

$
4,963Unrealized gain adjustment  ARS


500Unrealized loss adjustment  put option


(466
)Redemptions


(1,200
)Fair value at December 31, 2009

$
3,797Fair value at December 31, 2009

$
3,797Unrealized gain adjustment  ARS


109Unrealized loss adjustment  put option


(106
)Redemptions


(3,800
)Fair value at December 31, 2010

$
   (5)
    Property
    and Equipment, Net    December 31,2009


2010Computer equipment

$
21,421


$
24,785Purchased software


7,808



8,811Equipment


738



648Furniture and fixtures


1,697



1,971Leasehold improvements


1,209



1,272Total cost


32,873



37,487Less accumulated depreciation


(22,751
)


(26,785
)Total property and equipment, net

$
10,122


$
10,702  F-15




---



##### Table of Contents



(6)
    Intangible
    assets    InternallyCustomer


Purchased


DevelopedGoodwill


Relationships


Technologies


Software


TotalAs of December 31, 2009:Gross carrying value

$
7,975


$
3,450


$
6,547


$
556


$
18,528Accumulated amortization






(2,948
)


(4,434
)


(5
)


(7,387
)Net carrying value

$
7,975


$
502


$
2,113


$
551


$
11,141As of December 31, 2010:Gross carrying value

$
7,975


$
3,450


$
6,547


$
5,116


$
23,088Accumulated amortization






(3,315
)


(5,254
)


(395
)


(8,964
)Net carrying value

$
7,975


$
135


$
1,293


$
4,721


$
14,124Weighted-average amortization period:(in years)


n/a



4.0



3.9



3.7



3.9Aggregate amortization expense:2008

$



$
766


$
831


$



$
1,5972009






827



797



5



1,6292010






367



820



391



1,578Estimated amortization expense:2011

$



$
50


$
520


$
1,365


$
1,9352012






50



453



1,400



1,9032013






35



320



1,197



1,5522014














496



4962015














260



2602016














3



3   (7)
    Long-Term
    Debt and Credit Facility  (a)  2.50% Convertible
    Senior Notes
       F-16




---



##### Table of Contents



(b)  Credit
    Facility
    (8)
    Redeemable
    Convertible Preferred Stock    (9)
    Treasury
    Stock  and/or Rule 10b-18
  (10)
    Stock-Based
    Compensation   F-17




---



##### Table of Contents



Topic 718
    2008


2009


2010Stock-based compensation expense:Cost of recurring revenue

$
323


$
460


$
482Cost of professional services


638



612



486Sales and marketing


2,454



3,029



3,077Research and development


969



1,178



988General and administrative


1,641



2,507



2,821Stock-based compensation expense

$
6,025


$
7,786


$
7,854       Topic
    718
  2008

2009

2010Employee stock optionsWeighted average risk free rate


2.6
%


1.7
%


1.8
%Weighted average expected term


4.5
yrs


4.4
yrs


4.5
yrsWeighted average volatility


55
%


67
%


64
%Dividend yield


0
%


0
%


0
%     Risk Free Rate:
  Expected Term:
  Volatility:
 F-18




---



##### Table of Contents



Dividend Yield:
    Weighted





WeightedShares


Average





AverageShares


Underlying


Exercise


Aggregate


RemainingAvailable


Outstanding


Price Per


Intrinsic


Contractualfor Grant


Options


Share


Value


Life(In thousands)


(In years)Balance at December 31, 2009


2,774



5,947


$
10.96







7.2Annual reserve addition(1)


1,000







Granted(2)


(1,558
)


1,540



16.25Exercised






(1,051
)


12.02Forfeited, expired or exchanged(3)


217



(213
)


13.06Balance at December 31, 2010


2,433



6,223


$
12.02


$
72,701



7.0Vested or expected to vest at December 31, 2010






6,021


$
11.93


$
70,846



7.0Exercisable at December 31, 2010






3,274


$
11.21


$
40,783



5.7     (1)
    
    The 2004 Equity Incentive Plan provides for an automatic, annual
    increase on the first of each year in an amount equal to the
    lesser of; a) 1,000,000 shares, b) 4% of the
    number of outstanding common shares on the last day of the
    previous fiscal year, or c) such lesser amount as
    determined by the board of directors. The automatic annual
    increase has been approved by shareholders through
    December 31, 2014.(2)
    
    On June 7, 2010 the Company granted 18,150 restricted stock
    units to certain directors at a fair value of $13.61 per share.
    The shares were granted from the 2004 Equity Incentive Plan.(3)
    
    Shares forfeited, expired, exchanged or canceled under the 1998
    Long-Term Equity Incentive and Stock Option Plan are not
    available for re-grant under the 2004 Equity Incentive Plan.    (11)
    Commitments
    and Contingencies  (a)  Operating
    Leases
    2011

$
4,5712012


3,2662013


3,1432014


1,9842015


1,454Thereafter


1,041      F-19




---



##### Table of Contents



(b)  Hosting
    Services
      2011

$
2,0532012


6832013


3972014


33   (c)  Warranties
    and Indemnification
          (d)  Litigation
  Topic 450,Contingencies
   F-20




---



##### Table of Contents



(12)
    Income
    Taxes    Year Ended December 31,2008


2009


2010United States

$
(5,856
)

$
7,299


$
11,152Foreign


(1,385
)


(849
)


1,398Income (loss) before provision for income taxes

$
(7,241
)

$
6,450


$
12,550     Year Ended December 31,2008


2009


2010Current:Federal

$



$



$
(2,820
)Foreign


(134
)


(155
)


(167
)State


92



(424
)


(905
)Total current


(42
)

$
(579
)

$
(3,892
)Deferred:Federal










8,863Foreign










7,897State










2,972Total deferred










19,732Benefit (provision) for income taxes

$
(42
)

$
(579
)

$
15,840    F-21




---



##### Table of Contents



Year EndedDecember 31,2008

2009

2010Statutory federal tax rate


(34
)%


34
%


34
%Net operating loss tax benefits not realized (realized)


29



(23
)


(1
)Tax credits






(11
)


(3
)Stock-based compensation


5



1



(3
)State income taxes, net of federal benefit


(2
)


4



5Foreign taxes


2



2



2Foreign tax rate differential


(1
)






Valuation allowance adjustment for continuing operations










(163
)Nondeductible meals & entertainment expense


2



2



2Other










1Income tax rate


1
%


9
%


(126
)%     At December 31,2009


2010Deferred tax assets:Net operating loss carry forwards

$
13,634


$
14,156Deferred revenue


3,757



1,554Stock compensation


6,813



6,928Tax credits


1,256



1,635Fixed assets and intangibles


65



Other


1,647



2,105Total deferred tax assets


27,172



26,378Valuation allowance


(24,239
)


(2,139
)Net deferred tax assets


2,933



24,239Deferred tax liabilities:Fixed Assets and Intangibles






(755
)Deferred commissions


(2,686
)


(2,839
)Other


(247
)


(364
)Total deferred tax liabilities


(2,933
)


(3,958
)Net deferred tax assets

$



$
20,281    F-22




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##### Table of Contents



Topic
    718
      Year Ended December 31,2009


2010Balance as of January 1,

$



$
Tax positions taken in prior periodGross increases






312Gross decreases






Tax positions taken in current periodGross increases






23Settlements






Balance as of December 31,

$



$
335      F-23




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##### Table of Contents



(13)
    Fair
    Value of Financial Instruments    Account receivable and term receivables 
    current:
  Accounts payable  current:
  Term receivables  noncurrent:
  Debt:
  (14)
    Employee
    Benefit Plans       F-24




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##### Table of Contents



Purchase DateDec 31,

June 30,

Dec 31,

June 30,

Dec 31,2008

2009

2009

2010

2010Purchase price per share

$
7.34


$
11.21


$
16.50


$
14.91


$
22.49Shares purchased


14,129



11,903



7,038



8,632



5,381   (15)
    Subsequent
    Events  Topic 855,
    Subsequent Events
  (a)  Acquisition
      (b)  ESPP
    update
      (c)  Related
    party update
     F-25




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##### Table of Contents



Form 8-K
      (16)
    Quarterly
    Results (Unaudited)    Year Ended December 31, 2009First

Second

Third

FourthQuarter

Quarter

Quarter

Quarter(Unaudited)Operating statement data:Total revenue

$
36,037


$
36,340


$
38,731


$
41,579Gross profit


24,080



25,040



27,134



28,875Net income


1,263



36



1,965



2,607Net income per share:Basic and Diluted

$
0.04


$
0.00


$
0.06


$
0.08   Year Ended December 31, 2010First

Second

Third

FourthQuarter

Quarter

Quarter

Quarter(Unaudited)Operating statement data:Total revenue

$
42,102


$
43,454


$
48,593


$
51,373Gross profit


28,891



30,124



34,275



37,170Net income(1)


585



1,404



2,895



23,506Net income per share:Basic

$
0.02


$
0.04


$
0.09


$
0.72Diluted

$
0.02


$
0.04


$
0.09


$
0.64     (1)
    
    Net income and net income per share in fourth quarter of 2010
    were positively impacted by a tax benefit from a deferred tax
    asset valuation allowance reversal of $19.7 million. Please
    refer to Note 12, Income Taxes in the Notes to Consolidated
    Financial Statements for further discussion. F-26