**Exhibit 99.1**
**RISK FACTORS**
     You should carefully consider the risks described below. The risksdescribed are not the only ones we face. Any of the following risks could havea material adverse effect on our business, financial condition and operatingresults. You should also refer to the other information contained in thisreport, including our financial statements and the related notes.
**Our Profitability Will Suffer If We Are Not Able to Maintain Our Pricing andUtilization Rates and Control Our Costs.**
     Our profit margin, and therefore our profitability, is largely a functionof the rates we are able to recover for our services and the utilization rate,or chargeability, of our professionals. Accordingly, if we are not able tomaintain the pricing for our services or an appropriate utilization rate forour professionals and correspondingly reduce our costs, we will not be able tosustain our profit margin and our profitability will suffer. We are currentlyexperiencing pressure on our pricing as a result of the challenging economicenvironment. The rates we are able to recover for our services are affected bya number of factors, including:
 • our clients’ perception of ourability to add value through ourservices;
 • competition;
 • introduction of new services or products by us or our competitors;
 • pricing policies of our competitors; and
 • general economic conditions.
     Our utilization rates are also affected by a number of factors, including:
 • seasonal trends, primarily as a result of our hiring cycle and holidayand summer vacations (particularly in Europe);
 • our ability to transition employees from completed projects to newengagements; and
 • our ability to forecast demand for our services and thereby maintainan appropriate headcount in the appropriate areas of our workforce.
     Our profitability is also a function of our ability to control our costsand improve our efficiency. Current and future cost reduction initiatives maynot be sufficient to maintain our margins if the current challenging economicenvironment continues for several quarters.
**Our Global Operations Pose Complex Management, Foreign Currency, Legal, Tax andEconomic Risks, Which We May Not Adequately Address.**
     We conduct business in a number of countries around the world. In thefiscal year ended March 31, 2004, approximately 60% of our revenue wasattributable to activities in North America, 31% of our revenue wasattributable to our activities in Europe, and 9% of our revenue wasattributable to our activities in Latin America, Asia/Pacific and Africa. As aresult, we are subject to a number of risks, including:
 

 

 • the burdens of complying with a wide variety of national and local laws;
 • multiple and possibly overlapping and conflicting tax laws;
 • successful conversion to global operating and financial systems;
 • coordinating geographically separated organizations;
 • restrictions on the movement of cash;
 • the absence in some jurisdictions of effective laws to protect our intellectual propertyrights;
 • political instability;
 • currency fluctuations;
 • longer payment cycles;
 • restrictions on the import and export of certain technologies;
 • price controls or restrictions on exchange of foreign currencies; and
 • trade barriers.
**A Significant or Prolonged Economic Downturn Could Have a Material AdverseEffect on Our Results of Operations.**
     Our results of operations are affected by the level of business activityof our clients, which in turn is affected by the level of economic activity inthe industries and markets that they serve. A decline in the level of businessactivity of our clients could have a material adverse effect on our revenue andprofit margin. Although current economic conditions have improved over previousquarters, future economic conditions could cause some clients to reduce ordefer their expenditures for consulting services. Net revenue (beforeout-of-pocket expense reimbursements) for the fiscal year ended March 31, 2004increased by 16% from the fiscal year ended March 31, 2003. We haveimplemented and will continue to implement cost-savings initiatives to manageour expenses as a percentage of revenue. However, current and futurecost-management initiatives may not be sufficient to maintain our margins ifeconomic environment should weaken for a prolonged period.
**Our Quarterly Operating Results Will Vary From Quarter to Quarter, Which MayResult in Increased Volatility of Our Share Price.**
     We have experienced, and may in the future continue to experience,fluctuations in our quarterly operating results. These fluctuations couldreduce the market price of our Common Stock.
     Factors that may cause our quarterly operating results to vary include:
 • the business decisions of our clients regarding the use of our services;
 • the timing of projects and their termination;
 • the timing of revenue or income;
 • our ability to transition employees quickly from completed projects tonew engagements;
 

 

 • the introduction of new products or services by us or our competitors;  • changes in our pricing policies or those of our competitors;
 • our ability to manage costs, including personnel costs and supportservices costs; and
 • global economic and political conditions and related risks, including acts of terrorism.
     The timing of revenue is difficult to forecast because our sales cycle isrelatively long and our services are affected by both the financial conditionand management decisions of our clients and general economic conditions. A highpercentage of our expenses are relatively fixed at the beginning of any period.Because our general policy is not to adjust our staffing levels based upon whatwe view as short-term circumstances, a variation in the timing, initiation orcompletion of client assignments, particularly at or near the end of anyquarter, can cause significant variations in operating results from quarter toquarter and could result in losses for any particular period.
**Our Revenue Could Be Adversely Affected by the Loss of a Significant Client orthe Failure to Collect a Large Account Receivable.**
     We have in the past derived, and may in the future derive, a significantportion of our revenue from a relatively limited number of major clients. Fromyear to year, revenue from one or more individual clients may exceed 10% of ourrevenue for the quarter. During the fiscal year ended March 31, 2004, we hadone client that individually accounted for more than 11% of our net revenue.If we lose any major clients or any of our clients cancel or significantlyreduce a large project’s scope, we would lose a significant amount of revenue.In addition, if we fail to collect a large account receivable, we could besubject to significant financial exposure.
**The Absence of Long-Term Contracts With Our Clients Reduces the Predictabilityof Our Revenue.**
     Our clients are generally able to reduce or cancel their use of ourprofessional services without penalty and, in some circumstances, with littlenotice. As a result, we believe that the number of clients or the number andsize of our existing projects are not reliable indicators or measures of futurerevenue. We have in the past provided, and are likely in the future to provide,services to clients without long-term agreements. When a client defers,modifies or cancels a project, there is no assurance that we will be able torapidly redeploy our professionals to other projects in order to minimize theunderutilization of employees and the resulting adverse impact on operatingresults. We may not be able to replace cancelled or reduced contracts with newbusiness with the result that our revenue and profits may decline.
**Failure to Meet Client Expectations Could Result in Losses and NegativePublicity.**
     A failure or inability by us or one of our subcontractors to meet aclient’s expectations could damage our reputation and adversely affect ourability to attract new business and result in delayed or lost revenue. Ourclient engagements involve the creation, implementation and maintenance ofbusiness systems and other applications that can be critical to our clients’businesses. We may be sued or unable to collect accounts receivable if a clientis not satisfied with our service.
     Our client contracts may not protect us from liability for damages in theevent that we are sued. In addition, our general liability insurance coveragemay not continue to be available on reasonable terms or in sufficient amounts.The successful assertion of any large claim against us or the failure by us tocollect a large account receivable could result in significant financialexposure to us.
**The Price for Our Common Stock Has Been Volatile and Unpredictable.**
 

 

     The price for our Common Stock has been volatile. Our Common Stock hasbeen listed on the NASDAQ National Market since February 1997. The closingmarket price of the Common Stock has experienced variations, and since January1, 1999 through January 31, 2004, our high and low sales price has ranged froma high of $106.00 to a low of $1.38. The market price of our Common Stock mayexperience fluctuations in the future for a variety of reasons. These include:
 • negative news about other publicly traded companies in our industry;
 • general economic or stock market conditions unrelated to our operating performance;
 • quarterly variations in our operating results;
 • changes in earnings estimates by analysts;
 • announcements of new contracts or service offerings by us or our competitors;
 • financial performance of the Company; and
 • other events or factors.
     In addition, the stock market in recent years has experienced significantprice and volume fluctuations which have affected the market prices oftechnology related companies. These fluctuations may continue to occur anddisproportionately impact our stock price.
**An Inability to Keep Pace with Rapidly Changing Technology May Impair OurAbility to Remain Competitive.**
     Our failure to develop business and technology consulting services thatkeep pace with continuing changes in technology, evolving industry standards,information technology and client preferences will result in decreased demandfor our services. Among our challenges in this area are the need to:
 • continue to develop our strategic and technical experience;
 • develop new services that meet changing client needs; and
 • effectively use leading technologies.
We may not be able to meet these objectives on a timely or successful basis.
**Competition in Our Industry is Intense and Could Harm Our Business.**
     Increased competition in our industry could result in price reductions,reduced gross margins or loss of market share, any of which could seriouslyharm our business. The business and technology consulting services market,which includes a large number of participants, is subject to rapidtechnological changes and is highly competitive. We compete with a number ofcompanies that have significantly greater financial, technical and marketingresources, greater name recognition, and greater revenue than ours. We believethat the principal competitive factors in our industry include:
 • diagnostic capabilities;
 • effectiveness of strategic business models;
 • scope of services;
 • service delivery approach;
 • technical and industry expertise;
 • perceived value; and
 • results orientation.
     We believe that our ability to compete also depends in part on a number ofcompetitive factors outside of our control, including the ability of ourcompetitors to hire, retain and motivate senior consultants, the price at whichothers offer comparable services, and the extent of our competitors’responsiveness to client needs. We may not be able to compete successfully withour competitors in the future.
     In addition, there are relatively low barriers to entry in our industry.We do not own any patented technology that inhibits competitors from enteringthat market or providing services similar to ours. As a result, new and unknownmarket entrants could pose a threat to our business.
 

 

**If We Are Unable to Protect Our Intellectual Property Rights or If We InfringeUpon the Intellectual Property Rights of Others Our Business May Be Harmed.**
     Failure to secure or maintain protection of our intellectual propertycould adversely affect our ability to service our clients and generate revenue.We rely on a combination of non-disclosure and other contractual agreements andcopyright and trademark laws to protect our proprietary rights. We enter intoconfidentiality agreements with our employees, require that our clients enterinto such agreements, and limit access to and distribution of our proprietaryinformation. However, these efforts may be insufficient to preventmisappropriation of our proprietary information or to detect unauthorized useof our intellectual property rights.
     Ownership of intellectual property developed during our client engagementsis the subject of negotiation and is frequently assigned to the client uponpayment for our services. We generally retain the right to use any intellectualproperty that is developed during a client engagement that is of generalapplicability and is not specific to the client’s project. Issues relating tothe ownership of and rights to use intellectual property developed during thecourse of a client engagement can be complicated. Clients may demand assignmentof ownership or restrictions on our use of the work product. In addition,disputes may arise that affect our ability to resell or reuse intellectualproperty. We may have to pay economic damages in these disputes which couldadversely affect our business.
**Currency Exchange Rate Fluctuations Could Materially Adversely Affect OurResults of Operations.**
     Approximately 40% of DiamondCluster’s revenue for the fiscal year endedMarch 31, 2004 was derived from operations outside North America. The resultsof operations for DiamondCluster in the future could be significantly affectedby factors associated with international operations, such as changes in foreigncurrency exchange rates and uncertainties relative to regional economic orpolitical circumstances, as well as by other risks sometimes associated withinternational operations. Since the revenue and expenses of DiamondCluster’sforeign operations will generally be denominated in local currencies, exchangerate fluctuations between such local currencies and the U.S. dollar subject usto currency translation risk with respect to the reported results of ourforeign operations. As exchange rates fluctuate, these results, whentranslated, may vary from expectations and adversely impact overall expectedresults and profitability. Also, we may be subject to foreign currencytranslation risks when transactions are denominated in a currency other thanthe currency in which we incur expenses related to such transactions. There canbe no assurance that we will not experience fluctuations in financial resultsfrom our operations outside the United States as a result of foreign currencyfluctuations, and there can be no assurance that we will be able to reducecontractually or otherwise favorably affect the currency translation riskassociated with our operations.
**We Must Build Recognition and Client Acceptance of Our Name.**
     DiamondCluster has invested significant efforts in building recognitionand client acceptance of its name. We believe that market acceptance of thename DiamondCluster International, Inc. is an important aspect of our effortsto retain and attract clients.
     Promoting and maintaining name recognition depends largely on the successof our marketing efforts and the ability of DiamondCluster to provide highquality, reliable and cost-effective services. These efforts will requiresignificant expenses, which will affect our results of operations. Clientdissatisfaction with Company performance could diminish the value of ourbrand.
**The Failure to Integrate or Negotiate Successfully Any Future AcquisitionsCould Harm Our Business and Operating Results.**
 

 

     If we acquire businesses in the future and are unable to integratesuccessfully these businesses, it could harm our business and operatingresults. In order to remain competitive or to expand our business, we may findit necessary or desirable to acquire other businesses, products ortechnologies. We may be unable to identify appropriate acquisition candidates.If we identify an appropriate acquisition candidate, we may not be able tonegotiate the terms of the acquisition successfully, to finance the acquisitionor to integrate the acquired businesses, products or technologies into ourexisting business and operations. Further, completing a potential acquisitionand integrating an acquired business may strain our resources and requiresignificant management time. In addition, we may revalue or write-down thevalue of goodwill and other intangible assets in connection with futureacquisitions which would harm our operating results.
**We May Need to Raise Additional Capital in the Future Which May Not BeAvailable.**
     We may not be able to raise capital in the future to meet our liquidityneeds and finance our operations and future growth. We were not profitable inthe eleven quarters prior to the quarter ended December 31, 2003 and we may notbe profitable at times in the future. We believe that existing cash resources,the amounts available under our revolving line of credit and cash generatedfrom operations will be sufficient to satisfy our operating cash needs at leastthrough fiscal 2006. Any future decreases in our operating income, cash flow,or stockholders’ equity may impair our future ability to raise additional fundsto finance operations. As a result, we may not be able to maintain adequateliquidity to support our operations.
**Future Sales of Our Common Stock in the Public Market Could Cause the Price ofOur Stock to Decline.**
     In the future, our stockholders could sell substantial amounts of ourcommon stock in the public market which could cause our market price todecline. A substantial number of outstanding shares of common stock and sharesof our common stock issuable upon exercise of outstanding stock options andwarrants will become eligible for future sale in the public market at varioustimes. An increase in the number of shares of our common stock in the publicmarket could adversely affect prevailing market prices and could impair ourfuture ability to raise capital through the sale of our equity securities.
**Our Charter Documents and Delaware Law May Discourage an Acquisition ofDiamondCluster.**
     Provisions of our certificate of incorporation, by-laws, and Delaware lawcould make it more difficult for a third party to acquire us, even if doing sowould be beneficial to our stockholders. We may issue shares of preferred stockin the future without stockholder approval and upon such terms as our board ofdirectors may determine. Our issuance of this preferred stock could have theeffect of making it more difficult for a third party to acquire, or ofdiscouraging a third party from acquiring, a majority of our outstanding stock.In addition, the Company has adopted a Shareholder Rights Purchase Plan whichcould also have the effect of making it more difficult for a third party toacquire, or of discouraging a third party from acquiring a majority of ouroutstanding stock. Our charter and by-laws also provide that specialstockholders meetings may be called only by our Chairman of the board ofdirectors, by our Secretary at the written request of the chairman or by ourboard of directors, with the result that any third-party takeover not supportedby the board of directors could be subject to significant delays anddifficulties. In addition, our board of directors is divided into threeclasses, each of which serves for a staggered three-year term, which may makeit more difficult for a third party to gain control of our board of directors.
**We Currently Do Not Intend to Pay Dividends.**
     We have never paid any cash dividends on our common stock and do notexpect to declare or pay any cash or other dividends in the foreseeable future.