##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number: 001-33755
 SUCCESSFACTORS, INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    94-3398453
(I.R.S. Employer
Identification No.)
 1500 Fashion Island Blvd., Suite 300
San Mateo, California 94404
 (650) 645-2000
 þ o
  Large accelerated filer o
  Accelerated filer o
  Non-accelerated filer þ
  Smaller reporting company o(Do not check if smaller reporting company)  o þ




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##### 



SUCCESSFACTORS, INC.
 Table of Contents
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements:Condensed Consolidated Balance Sheets- March 31, 2008 (unaudited) and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations-Three months ended March 31, 2008 and 2007 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows-Three months ended March 31, 2008 and 2007 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3. Defaults Upon Senior Securities
    
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    
    33Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    33Signatures
    
    
    35EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SUCCESSFACTORS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (Note 1)ASSETS:Current assets:Cash and cash equivalents
    
    $
    68,871
    
    
    $
    82,274Marketable securities
    
    
    17,561
    
    
    
    8,513Accounts receivable, net of allowance for doubtful accounts of $812 and $481
    
    
    30,622
    
    
    
    42,072Deferred commissions
    
    
    4,792
    
    
    
    4,199Prepaid expenses and other current assets
    
    
    4,113
    
    
    
    2,347Total current assets
    
    
    125,959
    
    
    
    139,405Restricted cash
    
    
    925
    
    
    
    964Property and equipment, net
    
    
    5,897
    
    
    
    6,532Deferred commissions, net of current portion
    
    
    6,364
    
    
    
    7,343Other assets
    
    
    273
    
    
    
    300Total assets
    
    $
    139,418
    
    
    $
    154,544LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable
    
    $
    993
    
    
    $
    3,595Accrued expenses and other current liabilities
    
    
    8,066
    
    
    
    7,016Accrued employee compensation
    
    
    10,316
    
    
    
    18,265Deferred revenue
    
    
    92,688
    
    
    
    84,624Current portion of capital lease obligations
    
    
    25
    
    
    
    34Total current liabilities
    
    
    112,088
    
    
    
    113,534Capital lease obligations, net of current portion
    
    
    47
    
    
    
    56Deferred revenue, net of current portion
    
    
    20,088
    
    
    
    16,386Other long-term liabilities
    
    
    4,021
    
    
    
    4,625Total liabilities
    
    
    136,244
    
    
    
    134,601Commitments and contingenciesStockholders equity:Common stock, $0.001 par value, 200,000 and 200,000 shares authorized as of March
31, 2008 and December 31, 2007, respectively; 51,797 and 51,350 shares issued and
outstanding (excluding 592 and 679 legally issued and outstanding) as of March 31,
2008 and December 31, 2007, respectively
    
    
    52
    
    
    
    51Additional paid-in capital
    
    
    163,608
    
    
    
    161,150Accumulated other comprehensive income
    
    
    125
    
    
    
    55Accumulated deficit
    
    
    (160,611
    )
    
    
    (141,313
    )Total stockholders equity
    
    
    3,174
    
    
    
    19,943Total liabilities and stockholders equity
    
    $
    139,418
    
    
    $
    154,544
  3




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##### Table of Contents



SUCCESSFACTORS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months EndedMarch 31,2008
    
    
    2007Revenue
    
    $
    23,461
    
    
    $
    12,391Cost of revenue (1)
    
    
    9,336
    
    
    
    5,051Gross profit
    
    
    14,125
    
    
    
    7,340Operating expenses: (1)Sales and marketing
    
    
    21,609
    
    
    
    13,622Research and development
    
    
    5,209
    
    
    
    3,557General and administrative
    
    
    7,092
    
    
    
    2,651Total operating expenses
    
    
    33,910
    
    
    
    19,830Loss from operations
    
    
    (19,785
    )
    
    
    (12,490
    )Interest income
    
    
    825
    
    
    
    280Interest expense
    
    
    (146
    )
    
    
    (434
    )Other (expense) income
    
    
    (39
    )
    
    
    53Loss before provision for income taxes
    
    
    (19,145
    )
    
    
    (12,591
    )Provision for income taxes
    
    
    (153
    )
    
    
    (28
    )Net loss
    
    $
    (19,298
    )
    
    $
    (12,619
    )Net loss per common share, basic and diluted
    
    $
    (0.37
    )
    
    $
    (4.40
    )Shares used in computing net loss per common share, basic and diluted
    
    
    51,650
    
    
    
    2,869
 
 (1)
    
    Amounts include stock-based compensation expenses as
follows: Three Months EndedMarch 31,2008
    
    2007Cost of revenue
    
    $
    182
    
    
    $
    53Sales and marketing
    
    
    785
    
    
    
    214Research and development
    
    
    215
    
    
    
    46General and administrative
    
    
    571
    
    
    
    137
  4




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##### Table of Contents



SUCCESSFACTORS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Three Months EndedMarch 31,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (19,298
    )
    
    $
    (12,619
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    723
    
    
    
    333Amortization of deferred commissions
    
    
    1,593
    
    
    
    734Stock-based compensation expense
    
    
    1,753
    
    
    
    450Amortization of debt issuance costs
    
    
    
    
    
    
    98Adjustment to fair value of convertible preferred stock warrants
    
    
    
    
    
    
    (53
    )Changes in assets and liabilities:Accounts receivable
    
    
    11,450
    
    
    
    2,394Deferred commissions
    
    
    (1,207
    )
    
    
    (977
    )Prepaid expenses and other current assets
    
    
    (1,766
    )
    
    
    (415
    )Other assets
    
    
    27
    
    
    
    (8
    )Accounts payable
    
    
    (2,406
    )
    
    
    1,100Other accrued expenses
    
    
    1,384
    
    
    
    390Accrued other compensation
    
    
    (7,949
    )
    
    
    (3,317
    )Other liabilities
    
    
    (64
    )
    
    
    235Deferred revenue
    
    
    11,766
    
    
    
    4,452Net cash used in operating activities
    
    
    (3,994
    )
    
    
    (7,203
    )Cash flows from investing activities:Restricted cash
    
    
    39
    
    
    
    (48
    )Capital expenditures
    
    
    (88
    )
    
    
    (1,519
    )Purchase of available-for-sale securities
    
    
    (11,011
    )
    
    
    (2,205
    )Maturity of available-for-sale securities
    
    
    2,000
    
    
    
    125Net cash used in investing activities
    
    
    (9,060
    )
    
    
    (3,647
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    166
    
    
    
    65Proceeds from initial public offering, net of offering costs
    
    
    (545
    )
    
    
    Principal payments on capital lease obligations
    
    
    (18
    )
    
    
    (19
    )Net cash (used in) provided by financing activities
    
    
    (397
    )
    
    
    46Effect of exchange rate changes on cash and cash equivalents
    
    
    48
    
    
    
    2Net decrease in cash and cash equivalents
    
    
    (13,403
    )
    
    
    (10,802
    )Cash and cash equivalents at beginning of period
    
    
    82,274
    
    
    
    26,172Cash and cash equivalents at end of period
    
    $
    68,871
    
    
    $
    15,370Supplemental cash flow disclosure:Cash paid during the period for:Interest
    
    $
    2
    
    
    $
    2
  5




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##### Table of Contents



SUCCESSFACTORS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Organization and Significant Accounting Policies
 Organization
  Basis of Presentation
   Principles of Consolidation
  Use of Estimates
  Revenue Recognition
  6




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##### Table of Contents



Revenue Recognition, Application of AICPA Statement of Position 97-2
(SOP 97-2) to Arrangements That Include the Right to Use Software Stored on Another Entitys
Hardware, Revenue Arrangements with Multiple Deliverables
 
    
    there is persuasive evidence of an arrangement;
    
    the subscription or services have been delivered to the customer;
    
    the collection of related fees is reasonably assured; and
    
    the amount of related fees is fixed or determinable.
   Deferred Revenue
  Cost of Revenue
  7




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##### Table of Contents



Deferred Commissions
   Comprehensive Loss
  Income Taxes
  2. Recent Accounting Pronouncements
 Business
Combinations Noncontrolling Interests in Consolidated Financial
Statements, an amendment of Accounting Research Bulletin No. 51.
 Effective Date of FASB Statement No. 157 Fair Value
Measurements
 8




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##### Table of Contents



3. Cash, Cash Equivalents and Marketable Securities
  As of March 31, 2008Gross
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueCash
    
    $
    3,643
    
    
    $
    
    
    
    $
    
    
    
    $
    3,643Cash equivalents:Money market funds
    
    
    62,833
    
    
    
    
    
    
    
    
    
    
    
    62,833Commercial paper
    
    
    2,396
    
    
    
    
    
    
    
    (1
    )
    
    
    2,395U.S. government notes and bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total cash equivalents
    
    
    65,229
    
    
    
    
    
    
    
    (1
    )
    
    
    65,228Total cash and cash equivalents
    
    
    68,872
    
    
    
    
    
    
    
    (1
    )
    
    
    68,871Marketable securities:U.S. government notes and bonds
    
    
    17,523
    
    
    
    38
    
    
    
    
    
    
    
    17,561Total marketable securities
    
    
    17,523
    
    
    
    38
    
    
    
    
    
    
    
    17,561Total cash, cash equivalents, and marketable securities
    
    $
    86,395
    
    
    $
    38
    
    
    $
    (1
    )
    
    $
    86,432
   As of December 31, 2007Gross
    
    
    Gross
    
    
    EstimatedUnrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueCash
    
    $
    2,904
    
    
    $
    
    
    
    $
    
    
    
    $
    2,904Cash equivalents:Money market funds
    
    
    39,220
    
    
    
    
    
    
    
    
    
    
    
    39,220Commercial paper
    
    
    10,276
    
    
    
    
    
    
    
    
    
    
    
    10,276U.S. government notes and bonds
    
    
    29,865
    
    
    
    9
    
    
    
    
    
    
    
    29,874Total cash equivalents
    
    
    79,361
    
    
    
    9
    
    
    
    
    
    
    
    79,370Total cash and cash equivalents
    
    
    82,265
    
    
    
    9
    
    
    
    
    
    
    
    82,274Marketable securities:U.S. government notes and bonds
    
    
    8,513
    
    
    
    
    
    
    
    
    
    
    
    8,513Total marketable securities
    
    
    8,513
    
    
    
    
    
    
    
    
    
    
    
    8,513Total cash, cash equivalents, and marketable securities
    
    $
    90,778
    
    
    $
    9
    
    
    $
    
    
    
    $
    90,787
  4. Accrued Expenses and Other Current Liabilities
  As of
    
    
    As ofMarch 31,
    
    
    December 31,2008
    
    
    2007(unaudited)Accrued royalties
    
    $
    253
    
    
    $
    238Accrued partner referral fees
    
    
    249
    
    
    
    189Accrued other liabilities
    
    
    3,461
    
    
    
    2,930Accrued taxes payable
    
    
    864
    
    
    
    613Deferred rent
    
    
    251
    
    
    
    246Sales and use taxes
    
    
    2,988
    
    
    
    2,800$
    8,066
    
    
    $
    7,016
 9




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##### Table of Contents



As of
    
    
    As ofMarch 31,
    
    
    December 31,2008
    
    
    2007(unaudited)Accrued bonuses payable
    
    $
    1,994
    
    
    $
    7,231Accrued commissions payable
    
    
    3,862
    
    
    
    7,249All other accrued employee compensation payable
    
    
    4,460
    
    
    
    3,785$
    10,316
    
    
    $
    18,265
 5. Fair Value Measurements
        Fair Value Measurements as ofMarch 31, 2008Total
    
    
    Level 1
    
    
    Level 2Cash equivalents (1)
    
    $
    65,228
    
    
    $
    62,833
    
    
    $
    2,395Marketable securities (2)
    
    
    17,561
    
    
    
    
    
    
    
    17,561Total
    
    $
    82,789
    
    
    $
    62,833
    
    
    $
    19,956
 
 (1)
    
    Cash equivalents consist primarily of money market funds with original maturity dates
of three months or less, for which the Company determines fair value through quoted market
prices.(2)
    
    Marketable securities consists of U.S. Government Agencies and are priced using
available market information through processes such as benchmark curves, market valuations
of like securities, sector groupings and matrix pricing. 10




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##### Table of Contents



The Fair Value Option for
Financial Assets and Financial Liabilities  including an Amendment of FASB Statement No. 115
 6. Commitments and Contingencies
  7. Stock-Based Compensation
 Share-Based Payment
 Weighted-Shares
    
    
    AverageSubject to
    
    
    ExerciseShares Available
    
    
    Options
    
    
    Pricefor Grant
    
    
    Outstanding
    
    
    per Share(Shares in thousands)Balance at December 31, 2005
    
    
    765
    
    
    
    7,390
    
    
    
    0.14Additional shares authorized
    
    
    4,100
    
    
    
    Granted
    
    
    (4,453
    )
    
    
    4,453
    
    
    
    1.40Exercised
    
    
    
    
    
    
    (761
    )
    
    
    0.19Canceled/forfeited
    
    
    528
    
    
    
    (528
    )
    
    
    0.56Balance at December 31, 2006
    
    
    940
    
    
    
    10,554
    
    
    
    0.65Additional shares authorized
    
    
    12,137
    
    
    
    Granted
    
    
    (7,839
    )
    
    
    7,839
    
    
    
    7.99Exercised
    
    
    
    
    
    
    (4,389
    )
    
    
    0.25Canceled/forfeited
    
    
    920
    
    
    
    (920
    )
    
    
    3.16Balance at December 31, 2007
    
    
    6,158
    
    
    
    13,084
    
    
    
    5.00Granted (unaudited)
    
    
    (132
    )
    
    
    132
    
    
    
    8.59Exercised (unaudited)
    
    
    
    
    
    
    (447
    )
    
    
    1.58Canceled/forfeited (unaudited)
    
    
    669
    
    
    
    (669
    )
    
    
    6.43Balance at March 31, 2008 (unaudited)
    
    
    6,695
    
    
    
    12,100
    
    
    
    5.09
 11




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007(Unaudited)Expected life from grant date (in years)
    
    
    3.95
    
    
    
    4.29Risk-free interest rate
    
    
    2.44
    %
    
    
    4.74
    %Expected volatility
    
    
    50
    %
    
    
    52
    %Dividend yield
    
    
    
    
    
    
    Weighted-average estimated fair value
of options granted during the period
    
    $
    3.54
    
    
    $
    2.49
  Stock Plans
  8. Comprehensive Loss
  Three Months Ended March 31,2008
    
    
    2007Net loss
    
    $
    (19,298
    )
    
    $
    (12,619
    )Change in foreign currency translation gain (loss), net
    
    
    48
    
    
    
    Change in unrealized gain (loss) on marketable securities, net
    
    
    22
    
    
    
    1Comprehensive loss
    
    $
    (19,228
    )
    
    $
    (12,618
    )
 12




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##### Table of Contents



9. Net Loss Per Common Share
   Three Months Ended(unaudited)2008
    
    
    2007Net loss
    
    $
    (19,298
    )
    
    $
    (12,619
    )Shares used in computing net loss per common share, basic and diluted
    
    
    51,650
    
    
    
    2,869Net loss per common share, basic and diluted
    
    $
    (0.37
    )
    
    $
    (4.40
    )
  Three MonthsEndedMarch 31,(unaudited)2008
    
    
    2007Convertible preferred stock (as converted basis)
    
    
    
    
    
    
    32,546Options to purchase common stock and shares subject to repurchase
    
    
    628
    
    
    
    10,624Warrants (as converted basis)
    
    
    
    
    
    
    504628
    
    
    
    43,67410. Income Tax
   13




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Overview
    Performance Management Goal Management
   14




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##### Table of Contents



Critical Accounting Policies and Estimates
  Managements Discussion and Analysis of Financial Condition
and Results of Operations
 
    
    Revenue Recognition
    
    Accounting for Commission Payments
    
    Accounting for Stock-Based Awards
    
    Sales and Use Taxes
    
    Allowance for Doubtful Accounts
  Results of Operations
  Three MonthsEnded March 31,2008
    
    
    2007Revenue
    
    
    100
    %
    
    
    100
    %Cost of revenue
    
    
    40
    
    
    
    41Gross margin
    
    
    60
    
    
    
    59Operating expenses:Sales and marketing
    
    
    92
    
    
    
    110Research and development
    
    
    22
    
    
    
    29General and administrative
    
    
    30
    
    
    
    21Total operating expenses
    
    
    144
    
    
    
    160Loss from operations
    
    
    (84
    )
    
    
    (101
    )Interest income
    
    
    4
    
    
    
    2Interest expense
    
    
    (1
    )
    
    
    (4
    )Other, net
    
    
    
    
    
    
    Loss before provision for income taxes
    
    
    (81
    )
    
    
    (102
    )Provision for income taxes
    
    
    (1
    )
    
    
    Net loss
    
    
    (82
    )%
    
    
    (102
    )%
 
 Due to rounding to the nearest percent, totals may not equal the sum of the line items in the table above. 15




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##### Table of Contents



Revenue
  Three Months Ended March 31,2008
    
    2007
    
    Change(Dollars in thousands)(Unaudited)Revenue
    
    $
    23,461
    
    
    $
    12,391
    
    
    
    89
    %
   Cost of Revenue and Gross Margin
 Three Months Ended March 31,2008
    
    
    2007
    
    
    Change(Dollars in thousands)(Unaudited)Revenue
    
    $
    23,461
    
    
    $
    12,391
    
    
    
    89
    %Cost of revenue
    
    
    9,336
    
    
    
    5,051
    
    
    
    85
    %Gross profit
    
    $
    14,125
    
    
    $
    7,340
    
    
    
    92
    %Gross margin
    
    
    60
    %
    
    
    59
    %
  Operating Expenses
 Sales and Marketing
 Three Months Ended March 31,2008
    
    2007
    
    Change(Dollars in thousands)(Unaudited)Sales and marketing
    
    $
    21,609
    
    
    $
    13,622
    
    
    
    59
    %Percent of revenue
    
    
    92
    %
    
    
    110
    %
  16




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##### Table of Contents



Research and Development
 Three Months EndedMarch 31,2008
    
    
    2007
    
    
    Change(Dollars in thousands)(Unaudited)Research and development
    
    $
    5,209
    
    
    $
    3,557
    
    
    
    46
    %Percent of revenue
    
    
    22
    %
    
    
    29
    %
  General and Administrative
 Three Months EndedMarch 31,2008
    
    2007
    
    Change(Dollars in thousands)(Unaudited)General and administrative
    
    $
    7,092
    
    
    $
    2,651
    
    
    
    168
    %Percent of revenue
    
    
    30
    %
    
    
    21
    %
  Interest and Other Income (Expense), Net
 Three Months EndedMarch 31,2008
    
    2007
    
    Change(Dollars in thousands)(Unaudited)Interest income
    
    $
    825
    
    
    $
    280
    
    
    
    195
    %Interest expense
    
    
    (146
    )
    
    
    (434
    )
    
    
    (67
    )Other (expense) income
    
    
    (39
    )
    
    
    53
    
    
    
    (174
    )Percent of revenue
    
    
    3
    %
    
    
    (2
    )%
  Provision for Income Taxes
   17




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##### Table of Contents



Liquidity and Capital Resources
   Three MonthsEnded March 31,2008
    
    2007(Unaudited)Net cash used in operating activities
    
    $
    (3,994
    )
    
    $
    (7,203
    )Net cash used in investing activities
    
    
    (9,060
    )
    
    
    (3,647
    )Net cash (used in) provided by financing activities
    
    
    (397
    )
    
    
    46
 Net Cash Used in Operating Activities
   Net Cash Used in Investing Activities
   Net Cash Provided by Financing Activities
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Capital Resources
  Off-Balance Sheet Arrangements
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Currency Exchange Risk
  Interest Rate Sensitivity
  Fair Value of Financial Instruments
  
 ITEM 4. CONTROLS AND PROCEDURES
 (a) Disclosure Controls and Procedures
  (b) Changes in Internal Control Over Financial Reporting
  
 PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings
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Item 1A. Risk Factors
 A restated description of the risk factors associated with our business is
set forth below. This description includes any material changes to and supersedes the description
of the risk factors included in our Annual Report on Form 10-K for the year ended December 31,
2007. The risks and uncertainties described below are not the only ones facing us. Other events
that we do not currently anticipate or that we currently deem immaterial also may affect our
results of operations and financial condition.
 We have a history of losses, we expect to continue to incur losses and we may not achieve or
sustain profitability in the future.
  Our independent registered public accounting firm identified numerous material audit
adjustments in prior years, all of which we subsequently recorded, and noted certain material
weaknesses in our internal control over financial reporting. Failure to achieve and maintain
effective internal control over financial reporting could result in our failure to accurately
report our financial results.
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Because we recognize revenue from our customers over the term of their agreements, downturns
or upturns in sales may not be immediately reflected in our operating results.
  Because we recognize revenue from our customers over the term of their agreements but incur
most costs associated with generating customer agreements upfront, rapid growth in our customer
base will result in increased losses.
  Our business depends substantially on customers renewing their agreements and purchasing
additional modules or users from us. Any decline in our customer renewals would harm our future
operating results.
  We have limited experience with respect to our pricing model. If the prices we charge for
our application suite are unacceptable to our customers, our revenue and operating results may be
harmed.
  We have experienced rapid 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.
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Failure to adequately expand and ramp our direct sales force and develop and expand our
indirect sales channel will impede our growth.
  If our security measures are breached or unauthorized access to customer data is otherwise
obtained, our application suite may be perceived as not being secure, customers may curtail or stop
using our application suite, and we may incur significant liabilities.
  Because our application suite collects, stores and reports personal information of job
applicants and employees, privacy concerns could result in liability to us or inhibit sales of our
application suite.
   The market for our application suite depends on widespread adoption of strategic HR
software.
  We have derived a substantial majority of our subscription revenue from sales of our
performance management and goal management modules. If these modules are not widely accepted by new
customers, our operating results will be harmed.
 Performance
Management Goal Management
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The market for on-demand applications is at an early stage of development, and if it does
not develop or develops more slowly than we expect, our business will be harmed.
  
    
    perceived security capabilities and reliability;
    
    perceived concerns about ability to scale operations for large enterprise customers;
    
    concerns with entrusting a third party to store and manage critical employee data; and
    
    the level of configurability of on-demand applications.
  The market in which we participate is intensely competitive, and if we do not compete
effectively, our operating results could be harmed.
    Our quarterly results can fluctuate and, if we fail to meet the expectations of analysts or
investors, our stock price and the value of your investment could decline substantially.
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
    
    our ability to attract new customers;
    
    customer renewal rates;
    
    the extent to which customers increase or decrease the number of modules or users upon
any renewal of their agreements;
    
    the level of new customers as compared to renewal customers in a particular period;
    
    the addition or loss of large customers, including through acquisitions or
consolidations;
    
    the mix of customers between small, mid-sized and enterprise customers;
    
    changes in our pricing policies or those of our competitors;
    
    seasonal variations in the demand for our application suite, which has historically been
highest in the fourth quarter of a year;
    
    the amount and timing of operating expenses, particularly sales and marketing, related to
the maintenance and expansion of our business, operations and infrastructure;
    
    the timing and success of new product and service introductions by us or our competitors
or any other change in the competitive dynamics of our industry, including consolidation
among competitors, customers or strategic partners;
    
    network outages or security breaches;
    
    the timing of expenses related to the development or acquisition of technologies or
businesses and potential future charges for impairment of goodwill from acquired
companies; and
    
    general economic, industry and market conditions.
  The market for our application suite among large customers may be limited if they require
customized features or functions that we do not intend to provide.
  We depend on our management team, particularly our Chief Executive Officer and our
development personnel, and the loss of one or more key employees or groups could harm our business
and prevent us from implementing our business plan in a timely manner.
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If we cannot maintain our corporate culture as we grow, we could lose the innovation,
teamwork, passion and focus on execution that we believe contribute to our success, and our
business may be harmed.
  Our growth depends in part on the success of our strategic relationships with third parties.
   We rely on a small number of third-party service providers to host and deliver our
application suite, and any interruptions or delays in services from these third parties could
impair the delivery of our application suite and harm our business.
    If our application suite fails to perform properly, our reputation will be harmed, our market share
would decline and we could be subject to liability claims.
  
    
    lost or delayed market acceptance and sales;
    
    breach of warranty claims;
    
    sales credits or refunds to our customers;
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
    
    loss of customers;
    
    diversion of development and customer service resources; and
    
    injury to our reputation.
    We rely on third-party computer hardware and software that may be difficult to replace or
which could cause errors or failures of our service.
  If we are not able to develop enhancements and new features that achieve market acceptance
or that keep pace with technological developments, our business will be harmed.
   If we fail to develop widespread brand awareness cost-effectively, our business may suffer.
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Because our long-term success depends, in part, on our ability to expand the sales of our
application suite to customers located outside of the United States, our business will be
susceptible to risks associated with international operations.
  
    
    our ability to comply with differing technical and certification requirements outside the
United States;
    
    difficulties and costs associated with staffing and managing foreign operations;
    
    greater difficulty collecting accounts receivable and longer payment cycles;
    
    unexpected changes in regulatory requirements;
    
    the need to adapt our application suite for specific countries;
    
    difficulties in understanding and complying with local laws, regulations and customs in
foreign jurisdictions;
    
    tariffs, export controls and other non-tariff barriers such as quotas and local content
rules;
    
    more limited protection for intellectual property rights in some countries;
    
    adverse tax consequences;
    
    fluctuations in currency exchange rates;
    
    restrictions on the transfer of funds; and
    
    new and different sources of competition.
  Because competition for our target employees is intense, we may not be able to attract and
retain the quality employees we need to support our planned growth.
  Any failure to protect our intellectual property rights could impair our ability to protect our
proprietary technology and our brand.
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We may be sued by third parties for alleged infringement of their proprietary rights.
  Our use of open source and third-party technology could impose limitations on our ability to
commercialize our application suite.
  Changes in laws and/or regulations related to the Internet or changes in the Internet
infrastructure itself may cause our business to suffer.
   We may acquire other companies or technologies, which could divert our managements
attention, result in additional dilution to our stockholders and otherwise disrupt our operations
and harm our operating results.
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
    
    unanticipated costs or liabilities associated with the acquisition;
    
    incurrence of acquisition-related costs;
    
    diversion of managements attention from other business concerns;
    
    harm to our existing business relationships with business partners and customers as a
result of the acquisition;
    
    the potential loss of key employees;
    
    use of resources that are needed in other parts of our business; and
    
    use of substantial portions of our available cash to consummate the acquisition.
   We might require additional capital to support business growth, and this capital might not
be available on acceptable terms, or at all.
  Our business is subject to changing regulations regarding corporate governance and public
disclosure that will increase both our costs and the risk of noncompliance.
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Changes in financial accounting standards or practices may cause adverse, unexpected
financial reporting fluctuations and affect our reported results of operations.
  A significant portion of our total outstanding shares may be sold into the market in the
near future. If there are substantial sales of shares of our common stock, the price of our common
stock could decline.
 th
 If securities or industry analysts do not publish research or publish inaccurate or
unfavorable research about our business, our stock price and trading volume could decline.
  Our directors, executive officers and principal stockholders have substantial control over
us and could delay or prevent a change in corporate control.
  
    
    delaying, deferring or preventing a change in our control;
    
    impeding a merger, consolidation, takeover or other business combination involving us; or
    
    discouraging a potential acquirer from making a tender offer or otherwise attempting to
obtain control of us.
 Delaware law and provisions in our restated certificate of incorporation and restated bylaws
could make a merger, tender offer or proxy contest difficult, which could depress the trading price
of our common stock.
  
    
    our Board of Directors is classified into three classes of directors with staggered
three-year terms;
    
    only our Chairperson of the Board of Directors, our Chief Executive Officer, our
President or a majority of our Board of Directors are authorized to call a special meeting
of stockholders;
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
    
    our stockholders can only take action at a meeting of stockholders and not by written
consent;
    
    vacancies on our Board of Directors can be filled only by our Board of Directors and not
by our stockholders;
    
    our restated certificate of incorporation authorizes undesignated preferred stock, the
terms of which may be established and shares of which may be issued without stockholder
approval; and
    
    advance notice procedures apply for stockholders to nominate candidates for election as
directors or to bring matters before an annual meeting of stockholders.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   
 Item 3. Defaults Upon Senior Securities
 None
 
 Item 4. Submission of Matters to a Vote of Security Holders
 None
 
 Item 5. Other Information
 None
 
 Item 6. Exhibits
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EXHIBIT INDEX
 Exhibit No.
    
    Document31.1*
    
    Certification of Chief Executive Officer pursuant to Exchange
Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Exchange
Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith. 34




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SIGNATURES
  SuccessFactors, Inc.By:
    
    /s/ Bruce FeltBruce FeltChief Financial Officer(Principal Financial and Accounting Officer)Date: May 15, 2008
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EXHIBIT INDEX
 Exhibit No.
    
    Document31.1*
    
    Certification of Chief Executive Officer pursuant to Exchange
Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Exchange
Act Rule 13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.