##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2009



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
 to





Commission File
Number 000-26477

CYBERSOURCE CORPORATION

(Exact Name of Registrant as Specified in its Charter)



|                                                               |  |                                       
|-------------------------------------------------------------- |  | --------------------------------------
|Delaware                                                       |  | 77-0472961                            
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. EmployerIdentification
Number)

1295 Charleston Road

Mountain View, California 94043

(650) 965-6000

(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)





Securities Registered Pursuant to Section 12(b) of the Act:



|                                        |  |                                          
|--------------------------------------- |  | -----------------------------------------
|Title of Each Class                     |  | Name of Each Exchange on Which Registered
|Common Stock, $.001 Par Value per Share |  | The NASDAQ Global Select Market          

Securities Registered Pursuant to Section 12(g) of the Act:

None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933, as
amended.    x  Yes     ̈  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities
Act of 1934, as amended.     ̈  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.     ̈

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                      |  |                                               |  |                           |  
|-------------------------- |  | -------------------- |  | --------------------------------------------- |  | ------------------------- | -
|Large accelerated filer  x |  | Accelerated filer   ̈ |  | Non-accelerated filer   ̈                      |  | Smaller reporting company |  ̈
|                           |  |                      |  | (Do not check if a smaller reporting company) |  |                           |  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act)     ̈  Yes    x  No

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2009 was
approximately $929 million (based on a closing sale price of $15.30 per share as reported for the NASDAQ Global Select Market on June 30, 2009). For purposes of this calculation, shares of common stock held by officers and directors and shares
of common stock held by persons who hold more than 10% of the outstanding common stock of the registrant have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of executive officer or
affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of the
registrants Common Stock, $.001 par value per share, outstanding as of February 12, 2010 was 70,558,784.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive Proxy Statement relating to
its 2010 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.









---

##### Table of Contents

CAUTIONARY STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) adopted pursuant to the Private Securities Litigation Reform Act of 1995. Statements that are not purely historical may be
forward-looking, including statements regarding our expectations, objectives, anticipations, estimations, intentions, plans, hopes, beliefs, or strategies regarding the future. Such forward-looking statements include, but are not limited to our
expectations:



| |  |  | that analysis and design early in the project lifecycle reduces the number and costs of defects that may be found in later stages;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | regarding market data estimating dollar losses due to fraud, and the effectiveness of our systems and procedures to detect and prevent consumer and
merchant fraud;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regarding our ability to prevent security breaches and maintain confidential data;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | that we will be able to prevent system disruptions and accommodate increases in volume demand;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | regarding increases in competitive pressures, which may result in the reduction of our prices or our market share;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the ability of our technologies and employees to deliver services and performance;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | regarding the continuity of our bank sponsor relationship;
| | - |  | ----------------------------------------------------------



| |  |  | that we will incur approximately $21.8 million of incremental annual amortization expense relating to the Authorize.Net merger during the fiscal year
ended December 31, 2010;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | about the impact of our lawsuit with ReD and other litigation matters;
| | - |  | ----------------------------------------------------------------------



| |  |  | to continue expanding our international capabilities, enhancing our risk and security management offerings, and increasing the number of our resellers
and partner channels;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regarding increases or decreases in our global acquiring fees and gross margins based upon changes in the dollar value of credit card authorization
requests we process;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regarding the level of expenses and revenue growth in 2010; and
| | - |  | ---------------------------------------------------------------



| |  |  | that our cash and cash equivalents balance as of December 31, 2009 will be sufficient to meet our working capital and capital requirements for at
least the next twelve months.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We cannot guarantee that any forward-looking statement will be realized,
although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties, and potentially inaccurate assumptions. These risks and uncertainties include, among others, those discussed in
Part I Item 1A. Risk Factors, of this Annual Report on Form 10-K as well as our consolidated financial statements, related Notes, and the other financial information appearing elsewhere in this report and our other filings with the
Securities and Exchange Commission. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or
projected. You should bear this in mind as you consider forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.



2



---

##### Table of Contents

PART I



|ITEM 1. | BUSINESS
|------- | --------

Company Overview

CyberSource Corporation (CyberSource or the Company) is a leading provider of electronic payment
and risk management solutions. Our solutions enable electronic payment processing for Web, call center, and point-of-sale environments. We partner with and connect to a large network of payment processors and other payment service providers to offer
merchants a single source solution that simplifies electronic payment management. Our payment solutions allow eCommerce merchants to accept a wide range of online payment options, from credit cards and electronic checks, to global payment options
and emerging payment types. We also offer industry leading risk management solutions to help online merchants address complexities such as credit card fraud, online tax requirements, and export controls. CyberSource Professional Services help to
design, integrate, and optimize commerce transaction processing systems for merchants. Approximately 295,000 businesses use our solutions, including half the companies comprising the Dow Jones Industrial Average.

In 2009, we processed approximately 2.5 billion transactions, an approximately 28% increase over 2008. The dollar value of all credit
card authorization requests we processed in 2009 exceeded $120 billion, an approximately 10% increase over 2008.

CyberSource
Corporation was founded in 1994 and initially launched as software.net, an online software store that built payment processing solutions to support its sales. In 1997, the payment processing solution business was spun-off from software.net to
form a separate corporation initially named, Internet Commerce Services Corporation. Internet Commerce Services Corporation later changed its name to CyberSource Corporation and continues to operate today under that name.

Our headquarters is located at 1295 Charleston Road, Mountain View, California 94043, and we have sales, service, and development offices in
Japan, the United Kingdom, Northern Ireland, Singapore, and other locations in the United States including Bellevue, Washington, American Fork, Utah and Austin, Texas. We maintain a website at www.cybersource.com. The reference to this website
address does not constitute incorporation by reference of the information contained therein.

We are subject to the
informational requirements of the Securities Exchange Act of 1934 (the Exchange Act). Accordingly, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (the SEC). Such
reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site at www.sec.gov
that contains reports, proxy and information statements, and other information about issuers filed electronically. We also maintain a website at www.cybersource.com. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and all amendments to those reports, and the Proxy Statement for our Annual Meeting of Stockholders are made available, free of charge, on our website, www.cybersource.com, as soon as reasonably practicable after the reports have been filed
with or furnished to the SEC.

Market Characteristics

In 2009, JPMorgan estimated the U.S. online eCommerce market related to retail sales and travel to be $240.2 billion, with a three year compounded annual growth rate (CAGR) of 10% from 2009 to
2012. eCommerce in Europe has grown to $256.3 billion in 2009, with a CAGR over three years of 17% from 2009 to 2012. For the fourth quarter of 2009, the U.S. Census Bureau estimated that online sales of U.S. retailers comprised 3.8% of total U.S.
retail sales. For 2009, online sales of U.S. retailers increased to 3.7% up from 3.3% in 2008. Also for 2009, the U.S. Census Bureau data shows the annual growth rate of online sales of U.S. retailers was 1.7%, versus an overall retail sales
decrease of 6.8% for the same time period.

As the online eCommerce market continues to grow, selling
online has become a strategic business strategy for many organizations. Although credit cards have long been the dominant payment method available to online purchasers, alternative consumer payment options and cultural preferences have impacted the
global payment environment. A wide spectrum of payment options, such as debit cards, electronic checks, and alternative online payment options such as Bill Me Later® and PayPal® are emerging
worldwide. Since 2005, we have experienced a noticeable trend among some of our large U.S. customers that are seeking greater access into international markets, especially Europe and China. Conducting online commerce internationally involves
supporting more payment types, currency conversions, new payment processors, and mitigating higher fraud risk.



3



---

##### Table of Contents

Online fraud has evolved into an organized and systemic threat to online merchants. The
latest CyberSource Fraud Survey, sponsored by CyberSource and conducted by Mindwave Research in November 2009, concluded that projected dollar losses from U.S. and Canadian eCommerce due to online fraud were expected to be approximately
$3.3 billion in 2009, down from approximately $4.0 billion in 2008. This is the first drop in estimated revenues lost since 2003. According to the survey, the percentage of revenue that merchants say they would lose to fraud is approximately 1.2% in
2009, as compared to approximately 1.4% in 2008, the lowest estimate in the 11-year history of the survey. This is the result of many factors, including merchants greater use of automated decision tools to sort orders and the increasing number
of fraud detection tools they use to manage payment fraud risk. Despite strides merchants made this year, significant challenges still remain to detect fraud schemes as they are becoming increasingly complex. Merchants continued to show an increase
in interest for more sophisticated automation tools which can provide an assessment of the fraud potential of a transaction and can reduce reliance on human involvement.

In June 2005 in the U.S., Visa and MasterCard began requiring compliance with a comprehensive security requirement called the Payment Card Industry Data Security Standard (PCI) to limit the
threat of cardholder information theft. With the challenge of becoming PCI compliant, some merchants engage us to manage sensitive customer information such as credit card numbers and related transaction data. For merchants that subscribe to Secure
Storage or Hosted Payment Acceptance services, we handle and store all payment data on behalf of the merchants in PCI certified processing centers that connect directly with the banking network. We are evaluated annually for PCI compliance, and both
the enterprise and small business platforms have been separately verified as compliant for 2009-2010.Furthermore, security and card association standards require quarterly security scans, which we have conducted. We also conduct quarterly
threat assessment tests and employ rigorous security measures to prevent unauthorized access or security breaches. Online merchants are also focusing on meeting regulatory requirements in areas such as collection of sales taxes. European Union
directives require that all online sellers of digital goods collect the applicable value-added tax for sales in the European Union.

The impact of these trends is that electronic payment management is becoming more complex. Online merchants must maintain technical and financial connections with a number of different payment processors and service providers, integrate
these disparate connections with a number of internal business systems, allocate manual resources to keep pace with the growth of online sales, and comply with statutory and card association requirements. We enable our customers to meet these
requirements simply and cost effectively with our electronic payment and risk management solutions.

CyberSource Customers

Our customers range in size from small sole proprietorships to some of the worlds largest corporations and institutions. Our
customer base includes leading companies such as Air France, Borders Group, British Airways, Christian Dior, Eastman Kodak, Home Depot, Louis Vuitton, Massachusetts Institute of Technology, Microsoft, Nike, Starbucks, and Yahoo!, among thousands of
others. To properly serve this diverse set of needs, we divide our potential market into two customer profiles, enterprise and small business merchants, which require different solutions.

Enterprise merchants have high sales volumes and generally demand the greatest range of payment options and the most sophisticated risk and
management tools. These customers often sell in multiple countries and require support for local currencies and local payment options. Enterprise merchants also frequently need to integrate payment processing with one or more internal business
systems. We serve enterprise customers by providing solutions that address and simplify the breadth of these requirements.

Small business merchants generally seek simplicity and ease of use. We serve small business merchants by providing bundled services and integrations into popular online shopping cart software, while bringing to the small business market
some of the advantages of our enterprise-level services, including important new payment options such as electronic checks, as well as high-reliability and quality customer support.

In 2009, we did not have any single customer that was responsible for ten percent or more of our revenues.

CyberSource Products and Services

CyberSource provides technology and services that make it easier for merchants to accept, process and reconcile payments; manage fraud; and safeguard payment security. CyberSource brings these payment management solutions to market under
two brands: CyberSource Advanced for medium and large sized enterprise merchants and Authorize.Net for smaller sized merchants with less than $3 million in annual online sales.



4



---

##### Table of Contents

CyberSource Advanced

For the enterprise customer, we offer a modular set of payment, fraud management and payment security products and services called CyberSource Advanced. Requirements of these larger merchants typically
include acceptance of all major credit and debit cards, the ability to bill customers at regular monthly intervals, support for international payment options, sophisticated fraud management tools and systems, and tools to automate payment
reconciliation and other internal processes to reduce the administrative costs and complexities of payment operations.

Global Payment
Solutions

Global Payment Processing Services. CyberSource Advanced enables merchants to accept
payments made by all major credit and debit cards including American Express®, Discover®, Diners Club International®, JCB, MasterCard®, and
Visa® cards. Our customers can also accept payment by corporate procurement cards, electronic checks,
PayPal® Express Checkout, and the Bill Me Later® service. Merchants that have business models based on subscriptions can utilize the CyberSource recurring billing service with automated account updating services.
For merchants selling internationally, we support direct debit, and bank transfers, as well as regional card brands such as Carte Bleue, Carta Si, Dankort, Laser, Solo, and Visa Electron. We provide these services for online, call center, kiosk,
integrated voice response (IVR), and IP-enabled point of sale (POS) transactions. Below is a graphical illustration of the payment process:

LOGO



5



---

##### Table of Contents

Global Acquiring Services. We underwrite merchants to enable them to accept card payments
within the United States, as well as accept and process major and regional payment types worldwide. We interface with payment systems on behalf of the merchant to authorize the payment presented by a merchants customer, collect funds from
their customers bank, and deposit the funds into the merchants designated checking account. These services are available as an integrated offering with our payment solution packages and software. Below is a graphical illustration of the
merchant acquiring service:

LOGO

Payer Authentication Services. Through a single connection to CyberSource, our customers can also use card
association authentication systems such as Verified by Visa and MasterCard SecureCode. These card programs verify the cardholders identity directly with the card issuer in real-time to increase security of payment acceptance. In some markets
merchants are required to use these services if they accept Visa and MasterCard payments.

Tax Calculation. Online
organizations often require tools to facilitate tax payment. The CyberSource Tax Service calculates sales and use taxes for over 13,000 U.S. tax jurisdictions, 44,000 sales, sellers use, consumers use, and rental rates, and supports
value added tax calculation, as applicable, in the U.S., Canada, Latin America, Europe and the Asia Pacific.

Fraud Management Solutions

Merchants in many product categories face fraud management challenges. They must efficiently sort incoming orders to
optimize valid order conversion, while minimizing fraud risk and costly manual review. Our solutions are designed to help merchants address this challenge and can be implemented as an integrated element of a larger CyberSource payment management
solution, or autonomously in conjunction with payment services from other providers. Our services support merchants that wish to manage in-house, as well as those seeking to outsource.

CyberSource Decision Manager. CyberSource Decision Manager is a hosted rules and case management system that allows business managers to
automatically screen and route orders for acceptance, rejection, or review. The system includes a rule management interface with access to over 200 pre-integrated global validation services and tests, including our identity morphing detection model
(CyberSource Advanced Fraud Screen enhanced by Visa, the only risk assessment service endorsed and enhanced by Visa). Other pre-integrated detection services include device fingerprinting with deep packet inspection and statistical analysis of
purchase velocity. Analytics are also included to help merchants tune rules and optimize operations.



6



---

##### Table of Contents

Performance Monitoring and Screening Management. CyberSource fraud analysts provide
analysis, design, modeling and monitoring expertise to optimize transaction conversion, while minimizing manual review and fraud risk associated with card-not-present transactions. We collaborate with customers to set business metrics, review
performance, and provide business tools. Two service plans are available, Performance Monitoring (analysis, design, modeling and monitoring) and Screening Management (all services available in Performance Monitoring plus outsourced management of
manual order review on behalf of the merchant).

Chargeback Recovery Services. Using this service, merchants outsource
chargeback analysis and re-presentment to us. We review chargebacks received, investigate, and re-present them to the banking system to recover revenue. We share in a percentage of the revenue recovered.

Payment Security Management Solutions

Payment Tokenization with Remote Secure Storage. Using these services, merchants store sensitive credit card data at CyberSource, in our PCI-certified data centers, and use a payment token to
transact payment and any follow-on actions such as credits or follow-on billing. As payment tokens do not contain sensitive information, they are of no value to hackers even if compromised. This allows merchants to reduce the risk and complexity
associated with managing security of stored payment data.

Hosted Payment Acceptance Services. CyberSource hosts the payment
fields which receive payment data, often as an object within the merchants actual checkout page. This eliminates another point of merchant security management concern and cost because payment data is accepted directly by CyberSource and does
not touch the merchants network.

Systems Centralization and Managed Hosting Services. Security management can be
complicated by autonomous systems being used to serve multiple sales channels. Merchants seek to counter this by centralizing payment systems into a single platform. CyberSource Global Services assists customers with design and implementation of
centralized systems, and offers optional managed hosting services which provide full outsourcing and management of the payment infrastructure. This provides another means for merchants to reduce the scope of their security management concerns as it
reduces the scope of infrastructure they must manage (also known as reducing PCI scope).

Professional Services

Building upon our experience in eCommerce, we employ a team of experts that can help merchants operate online businesses. CyberSource
Professional Services provides business and technical consulting services including technology selection, business process design, devising merchant-specific risk management strategies, systems installation, integration of our products and services
with a merchants existing internal systems, building custom reporting tools, disaster recovery planning, system centralization and security consulting. As of December 31, 2009, we employed 19 persons in our Professional Services group.

Authorize.Net

Targeted toward small and medium-sized merchants with under $3 million in annual sales, Authorize.Net enables merchants to authorize, settle, and manage credit card and electronic check payments via Web sites, retail stores, mail
order/telephone order (MOTO) call centers and mobile devices. Merchants can accept a variety of payments including all major credit cards as well as electronic checks. Authorize.Net also certifies numerous third-party point-of-sale
solutions and devices that are integrated to the Authorize.Net Payment Gateway.

In addition to credit card processing,
Authorize.Net offers merchants a number of standard services including:



| |  |  | Card Code Verification (CCV), which uses a three- or four-digit number that appears on the back of a credit card (on the front for American
Express) and is used to validate customer information on file with the credit card associations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Address Verification Service (AVS), which verifies the customers billing addresses submitted with e-commerce transactions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | Virtual Terminal, which allows merchants to manually enter transactions via a Web browser.
| | - |  | ------------------------------------------------------------------------------------------



7



---

##### Table of Contents

| |  |  | Verified Merchant Seal, which allows consumers to authenticate that Web sites displaying the seal are verified Authorize.Net merchants.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Virtual Point of Sale (VPOS), which allows card present or retail merchants to process transactions via a desktop computer and credit card
reader.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

In addition, Authorize.Net offers merchants extensive reporting, and
QuickBooks® compatibility as part of its standard services.

Premium value-adding services include:



| |  |  | eCheck.Net®,
which allows merchants to process electronic check transactions directly from a Web site or through the Virtual Terminal.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Automated Recurring Billing (ARB), which allows merchants to create a recurring billing schedule or subscription for the
purchase of goods or services.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Advanced Fraud Detection Suite (AFDS), which is a powerful, rules-based set of transaction filters and Internet Protocol (IP) address
tools designed to help Web merchants identify, manage and prevent costly fraudulent transactions.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These
services are integrated into the Authorize.Net platform, providing merchants with the ability to adapt their payment solution to their business needs.

Technology

Transaction Services

We operate two transaction processing platforms, one for enterprise merchants and one for small business customers. They are a modular architecture designed for scalability, reliability, extensibility and
performance. These systems are composed of multiple groups of servers and routers that appear as a single point of contact to our customers systems. Our transaction processing systems manage workflow functions and the required communications
between our servers, our database, and our processors, including American Express, Barclays Bank, Chase Paymentech Solutions, First Data Corporation, Global Payment Systems, Streamline International (a division of the Royal Bank of Scotland Group),
TSYS Acquiring Solutions and others. In addition, we have implemented a global network of telecommunications access points that are designed to optimize transaction processing response times and to mitigate the effects of system failures. The
primary software components of our two systems are the respective client software, Order Processing Application Programming Interfaces (APIs), commerce services applications, transaction databases and data warehouses.

Client Software

Our
commerce services are invoked by a standardized programming interface residing on our customers commerce servers. For our enterprise platform, client software is offered in two protocols, Simple Order Processing API and Simple Commerce
Messaging Protocol (SCMP), and can be installed by customers using pre-built developer kits and application plug-ins. These developer kits are available for most popular programming environments, including ASP/COM, .NET, Java and others,
and for most operating systems, including Windows NT/2000, Linux, and UNIX (Solaris, HP/UX, IBM/AIX and others). Developer kits also come with samples that customers can use to deploy CyberSource services within their enterprises.

Simple Order Processing API

For our enterprise platform, we offer the CyberSource Simple Order Processing API to enable the secure and reliable communication of order data from our customers systems to CyberSource systems. The Simple Order Processing API
provides our customers with a way to send invoice data to CyberSource for processing by any of the CyberSource commerce services applications. Using industry standard Web services technologies, including SOAP, XML, and WS Security, the Simple Order
Processing API provides customers with an industry recognized implementation path allowing the API to be built into customer order management applications. The API uses the Data Encryption Standard, RSA/public key cryptography and digital
certificates to provide secure signed communication of transaction data.



8



---

##### Table of Contents

We also developed SCMP to enable efficient and secure connections between our systems and
our customers systems. In order to provide secure messaging, SCMP utilizes industry standards for secure communications including the Data Encryption Standard, RSA/public key cryptography and digital certificates. SCMP has been designed to be
integrated into virtually any commerce server platform.

For our small business platform, the methods to process transactions
through the payment gateway range from Simple Checkout Buy Now and Donate buttons to fully integrated, highly customizable APIs. Web merchants have the ability to choose which connection method best fits their payment
acceptance infrastructure. Connection methods are Advanced Integration Method (AIM) and Server Implementation Method (SIM).

AIM is a merchant-initiated server-to-server connection for submitting transactions to the payment gateway. AIM employs industry standard secure data encryption technology  128-bit SSL
protocol. Additional features include: transaction key authentication, merchant control over all phases of the customers online transaction experience, and configurable transaction response that integrate with merchant applications. SIM is a
solution for Web merchants with basic customization needs. The Authorize.Net payment gateway handles all the steps in the secure transaction processpayment data collection, data submission and the response to the customer. Additional features
of SIM include: a payment gateway hosted payment form employing 128-bit SSL data encryption, transaction digital fingerprints to enhance security, and a customizable payment gateway hosted payment form and/or receipt page.

MOTO merchants can submit transactions manually via a secure Web browser using the Virtual Terminal or Batch Upload tool. Retail merchants
can process transactions using the Authorize.Net VPOS. Additionally, there are approximately 122 third-party certified products, including shopping carts, kiosks, and mobile and software services that have integrated their eCommerce solution with
the small business payment gateway. These integrated services provide merchants with checkout page solutions or hardware and software that are already integrated with the payment processing gateway.

Commerce Services Applications

We have developed and licensed a set of software applications that perform our hosted services. In many cases, execution of the applications is distributed among the processing systems and database systems, enabling us to minimize
interruptions during scheduled maintenance, code pushes, and system modifications.

For our enterprise platform, these
services include credit card processing, electronic check processing, order decision management, gift and promotional certificates, Bill Me Later payment service, payer authentication, PayPal, CyberSource Advanced Fraud Screen enhanced by Visa, tax
services, delivery address verification, and export compliance. For our small business platform, these services include eCheck.Net, Automated Recurring Billing, Fraud Detection Suite, Customer Information Manager, and Virtual Point of Sale.

Transaction Database Architecture

Two primary sets of databases form the core of our transaction processing system: the transaction processing databases, which maintain information necessary to process each individual transaction, and the
post-transaction database, which generates and provides detailed information about customers transactions, with advanced reporting capabilities available in XML and other formats.

Data Centers and Network Access

Our data centers facilities are located
in San Jose, California; Seattle, Washington; Denver, Colorado; London, England; and Tokyo, Japan. These secure data center facilities contain our servers, network firewalls, routers and other technology necessary to provide high availability
transaction services and connectivity to the Internet, our customers and processing partners. The data centers provide high-speed and redundant network connectivity, uninterruptible power systems, fire detection and suppression systems, physical
security and surveillance on a 24 hours a day, 7 days a week, 365 days a year basis. In addition, we have access to numerous network points of presence located on five continents from third party providers, enhancing our ability to serve customers
globally. These points of presence, through controlled route announcements to providers such as AboveNet, AT&T, Cable & Wireless, GLBX, Level 3 Communications, Sprint, Telia, UU-NET and Verio enable us to provide what we believe are
direct, rapid and reliable access to our suite of services.



9



---

##### Table of Contents

Industry Standards

The implementation of our architecture for hosted services is based on and complies with widely accepted industry standards. For example, our transaction processing systems utilize components from
industry leaders such as Cisco, Hewlett Packard, IBM, Microsoft, Oracle, Red Hat, RSA Data Security, Sun Microsystems and Sybase. Adherence to industry standards provides compatibility with existing applications, ease of modification, and reduces
the need for software modules to be rewritten over time, thus protecting our customers investments.

Product Development

Our product development team is responsible for the design, development, and maintenance of our core infrastructure for
services. We emphasize quality assurance throughout our development lifecycle. We believe that a strong emphasis placed on analysis and design early in the project lifecycle reduces the number and costs of defects that may be found in later stages.

When appropriate, we utilize third parties to expand the capacity and technical expertise of our internal product development
organization. On occasion, we have licensed third-party technology that we feel provides the strongest technical alternative. We believe this approach shortens time-to-market without compromising our competitive position or product quality. As of
December 31, 2009, we employed 161 persons in our product development department.

Intellectual Property

Our success depends upon our proprietary technology and licensed technology. We rely on a combination of patent, copyright, trademark, trade
secret laws, confidentiality procedures, and licensing arrangements to establish and protect our proprietary rights. We have been issued twenty-seven patents and have forty-three patent applications pending. The issued patents cover much of the
technology we employ, including fraud detection, cryptography, digital certificates, stored value services, and digital software distribution. Sixteen of the issued patents were acquired as a result of the Authorize.Net Holdings, Inc. acquisition in
November 2007 and cover technology related to telecommunications. We have pending patent applications covering cryptography, order management, digital delivery, stored value services, fraud detection, and digital delivery. We investigate, define,
and prepare applications for new patents as a part of the standard product development cycle. We cannot assure that any patent application that we file will issue as a patent, and we cannot assure that any patent issued to us will not be held
invalid or unenforceable based on prior art or for any other reason. Some of our technology is designed to include intellectual property obtained from third-parties. While it may be necessary in the future to seek or renew licenses relating to
various aspects of our products and business methods, we believe, based upon past experience and industry practice, that such licenses generally could be obtained on commercially reasonable terms; however, there is no guarantee that such licenses
could be obtained at all.

We believe that numerous patent applications relating to the Internet commerce field have been
filed or have been issued as patents. From time to time, in the ordinary course of business, we may become aware of one or more patents of third parties that we choose to evaluate for a variety of purposes. These purposes may include determining the
general contents of patents, reviewing the technological developments of their assignees, and determining whether our technology may overlap. We have not conducted searches to determine whether any of our services or technology could be alleged to
infringe upon any patent rights of any third party. We cannot assure that none of our products, services, and technology infringes any patent of any third party.

As part of our confidentiality procedures, we generally enter into non-disclosure agreements with our employees, contractors, vendors, potential customers and alliances: and, our license agreements with
our customers, with respect to our software, services, documentation and other proprietary information, contain confidentiality obligations. Despite these precautions, third parties could reverse engineer, copy or otherwise obtain our technology
without authorization, or develop similar technology independently. We are unable to determine the extent to which piracy of our intellectual property or software exists. Software piracy is a prevalent problem in our industry. Effective protection
of intellectual property rights may be unavailable or limited in foreign countries. We cannot assure that the protection of our proprietary rights will be adequate or that our competitors will not independently develop similar technology, duplicate
our services, or design around any intellectual property rights we hold. For further information regarding infringement of our patents, see Note 13Litigation and Contingencies to the Consolidated Financial Statements set forth in Item 8
of this Annual Report on Form 10-K.

From time to time we may receive notice of claims of infringement of other parties
intellectual property rights. As the number of services in our market increases and functionalities overlap, companies such as ours may become increasingly subject to infringement claims. Any infringement claims, with or without merit, could be
time-consuming, result in costly litigation,



10



---

##### Table of Contents

diversion of technical and management personnel, or require us to develop non-infringing technology or enter into licensing agreements. Such licensing agreements, if required, may not be
available on acceptable terms, if at all. In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the proprietary rights on a timely basis, our business, operating results and
financial condition could be materially adversely affected.

Service Delivery

Our service delivery department is responsible for the management and support of our global data centers and technology infrastructure 24
hours a day, 7 days a week, 365 days a year. We support and manage the transaction services business with enterprise-class technologies and tools. These technologies and tools are deployed and managed by strict adherence to proven operational
principles, processes, and procedures. We believe this technology, the processes, and our employees enable us to deliver the highest level of services and performance to our customers. As of December 31, 2009, we employed 80 persons in our
service delivery department.

Customer Support

We provide a range of customer implementation and sustaining support services to ensure a high level of performance, reliability, and customer satisfaction for our customers. We believe these services
ensure our customers get solutions implemented quickly, as well as provide the support necessary to identify and effectively resolve operational issues. Our offerings include phone support, online ticketing, e-mail, chat, and self-help. Premium
support is also offered to our enterprise customers, and includes support from dedicated technical account managers. As of December 31, 2009 we employed 162 persons in our customer support department.

Sales and Marketing

We
maintain distinct sales and marketing organizations for our enterprise and small businesses groups. We currently have active partnership relationships with approximately 4,700 e-Commerce Technology Resellers, Processors, Financial Institutions, and
Independent Sales Organizations (ISOs). Our enterprise sales and marketing department targets prospective customers worldwide through a direct sales force as well as through partners that have established reseller or referral
relationships. Our small business sales and marketing department targets prospective small business customers domestically through reseller and referral (Affiliate Reseller) relationships, as well as inside sales.

Enterprise Resellers: We have contractual relationships with our resellers that allow them to offer and bundle the CyberSource suite of
services in conjunction with their solution offering and facilitate the sale and billing of our services. Resellers, including both banks and payment service providers, are authorized to sell our hosted payment services and support services.

Enterprise Referral Partners: These are companies with which we have referral agreements, structured with or without monetary
incentives. These allies include companies from the payment industry, independent software vendors, integrators and consulting firms.

Small Business Resellers: We have contractual relationships with our small business resellers that allow them to offer and bundle our small business offering (Authorize.Net) suite of services with an internet or retail-based merchant
account. Our small business resellers include both large banks and smaller ISOs and merchant service providers (MSPs). Buy rates are provided to each reseller for each of the small business products and services. Resellers access a
reseller interface to setup new merchants on the small business platform, set sell rates for each merchant and access reporting information for individual merchants or their entire portfolio. Resellers receive a monthly residual based on the
difference between their buy rates and the sell rates they set for each merchant.

Small Business Affiliate Resellers:
Affiliate resellers are individuals and businesses that have merchant customers, but are not able to provide those merchant customers with payment services. The affiliate refers the merchant to Authorize.Net and we then handle the setup, billing and
ongoing support for their payment gateway. Affiliates receive a commission for each referral sale that we close, as well as a portion of the monthly fees and transaction fees generated by each of the merchants.

In addition to channel and referral relationships, we pursue both solutions alliances and strategic alliances. These result in cooperative
product development efforts, streamlining of integration capabilities and leveraged marketing efforts. These solution alliances integrate our technology into some of their products, making it easier for their customers to access our products and
services.



11



---

##### Table of Contents

As of December 31, 2009, we employed a total of 124 employees in sales and marketing
and an additional 19 professional service consultants.

Competition

The market for our products and services is intensely competitive and subject to rapid technological change. We expect competition to
intensify in the future.

We face competition from merchant acquirers, independent sales organizations, and payment processors
such as Chase Paymentech, First Data Corporation, and Royal Bank of Scotland. We also face competition from transaction service providers such as PayPal and Retail Decisions, as well as eCommerce providers such as Accertify, Inc., Digital River and
GSI Commerce Inc. Furthermore, other companies, including financial services and credit companies may enter the market and provide competing services. Another source of competition comes from businesses that develop their own internal, custom-made
systems. Such businesses typically make large initial investments to develop custom-made systems and therefore, may be less likely to adopt outside services or vendor-developed online commerce transaction processing software.

We compete on the basis of certain factors, including:



| |  |  | system and product reliability;
| | - |  | -------------------------------

| |  |  | product performance;
| | - |  | --------------------

| |  |  | features and functionality;
| | - |  | ---------------------------

| |  |  | outsourced management;
| | - |  | ----------------------

| |  |  | domain expertise;
| | - |  | -----------------

| |  |  | sales channels, operating environments and applications supported;
| | - |  | ------------------------------------------------------------------

| |  |  | ease of implementation and integration;
| | - |  | ---------------------------------------

| |  |  | time to market;
| | - |  | ---------------

| |  |  | customer support; and
| | - |  | ---------------------

| |  |  | price.
| | - |  | ------

Presently, we believe that we compete favorably with respect to each of these factors. However, the market for our solutions is rapidly evolving and we may not be able to compete successfully against current and future competitors. We
expect that competitive pressures may result in the reduction of our prices or our market share or both, which could materially and adversely affect our business, results of operations, or financial condition.

Employees

As of
December 31, 2009, we had a total of 654 full-time employees, including 143 employees in professional services, sales and marketing, 161 employees in product development, 242 employees in service delivery and customer support, and 108 employees
in general and administrative services. None of our employees are represented by a labor union and we consider employee relations to be good.

International Sales

Products and services provided to merchants outside the United States accounted for 7.4%,
6.8%, and 8.7% of our revenues in 2009, 2008, and 2007, respectively.

Regulations

The following regulations may adversely affect our business now or in the future:



| |  |  | Fair Credit Reporting Act.Because our fraud screening system assesses the probability of fraud in an online credit card
transaction, partly based on analyses of data compiled from our base of customers that use the fraud screening services, we may be deemed a consumer reporting agency under the Fair Credit Reporting Act (the FCRA). As a precaution, we
have implemented processes that we believe will enable us to comply with the FCRA if we were deemed a consumer reporting agency. Complying with the FCRA requires us to provide information about personal data stored by us. Failure to comply with the
FCRA could result in claims being made against us by individual consumers and the Federal Trade Commission.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12



---

##### Table of Contents

| |  |  | Export Control Regulations.    Current export control regulations prohibit the export of strong encryption technology
without a license unless exempt from license requirements, thereby preventing us from using stronger encryption technology to protect the security of data being transmitted to and from Internet merchants outside of the United States. We have
obtained a license to use 2048-bit encryption technology with our international merchants. Furthermore, we believe that our products and services fall under certain licensing exemptions as financial products.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Privacy Laws.    Because we receive, transmit, and store certain financial information to facilitate the provision of
payment services, which information includes credit card numbers and bank account numbers, we may be subject to various federal and State regulations regarding the protection of personally identifying information. Applicable laws may include,
without limitation, the Gramm-Leach-Bliley Act, the Fair and Accurate Credit Transactions Act, and various State laws. In the event our systems are compromised by an unauthorized party, many of these privacy laws require that we provide notices to
all card and account holders in our databases whose personally identifiable data we reasonably believe may have been compromised. To mitigate the risk of compromised information, we use strong encryption to encrypt card numbers that are stored in
our post transaction databases.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 1A.    RISK | FACTORS
|---------------- | -------

Set forth
below and elsewhere in this Annual Report on Form 10-K, including in Item 7, Managements Discussion and Analysis, and in other documents we file with the Securities and Exchange Commission are risks and uncertainties that could cause
actual results to differ materially from those described herein:

Risks Related to Our Business

Potential system failures and lack of capacity issues could negatively affect demand for our services.

Our ability to deliver services to our merchants depends on the uninterrupted operation of our commerce transaction processing systems. Our
systems and operations are vulnerable to damage or interruption from:



| |  |  | denial of service attacks;
| | - |  | ----------------------------



| |  |  | computer viruses;
| | - |  | -----------------



| |  |  | war, earthquake, fire, flood and other manmade or natural disasters; and
| | - |  | ------------------------------------------------------------------------



| |  |  | power loss, telecommunications or data network failure, operator negligence, improper operation by employees, physical and electronic break-ins and
similar events.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Despite the fact that we have implemented redundant servers in third-party hosting centers
located in San Jose, California; Seattle, Washington; Denver, Colorado; London, England; and Tokyo, Japan, we may still experience service interruptions for the reasons listed above and a variety of other reasons. If our redundant servers are not
available, we may not have sufficient business interruption insurance to compensate us for resulting losses. We have experienced periodic interruptions and performance issues, affecting all or a portion of our systems, which we believe will continue
to occur from time to time. For example, on July 3, 2009, our small business services were unavailable for approximately eleven hours due to a fire and subsequent loss of power at our third-party hosting center in Seattle, Washington. Any
interruption in our systems that impairs our ability to efficiently and timely provide services could damage our reputation and reduce demand for our services.

In addition, our success also depends on our ability to grow, or scale, our commerce transaction systems to accommodate increases in the volume of traffic on our systems, especially during peak periods of
demand. We may not be able to anticipate increases in the use of our systems or successfully expand the capacity of our network infrastructure. Our inability to expand our systems to handle increased traffic could result in system disruptions,
slower response times and other difficulties in providing services to our merchant customers, which could materially harm our business.

A breach of our eCommerce security measures could reduce demand for our services.

A requirement of the
continued growth of eCommerce is the secure transmission of confidential information over public networks. We rely on public key cryptography, an encryption method that utilizes two keys, a public and a private key, for encoding and decoding data,
and digital certificate technology, or identity verification, to provide the security and authentication necessary for secure transmission of confidential information. A party who is able to circumvent security measures could misappropriate
proprietary information or interrupt our operations. Any compromise or elimination of security could reduce demand for our services.



13



---

##### Table of Contents

We may be required to expend significant capital and other resources to protect against
security breaches and to address any problems they may cause. Concerns over the security of the Internet and other online transactions and the privacy of users may also inhibit the growth of the Internet and other online services generally, and the
Web in particular, especially as a means of conducting commercial transactions. Because our activities involve the storage and transmission of proprietary information, such as credit card numbers, security breaches could damage our reputation and
expose us to a risk of loss, fines, or litigation and other liabilities. Our security measures may not prevent security breaches, and failure to prevent security breaches may disrupt our operations.

We could incur chargeback or merchant fraud losses that would adversely affect our earnings.

We have potential liability for certain transactions processed through our global acquiring services if the payments associated with such
transactions are rejected, refused, or returned for reasons such as consumer fraud or billing disputes. For instance, if a billing dispute between a merchant and payer is not ultimately resolved in favor of the merchant, the disputed transaction may
be charged back to the merchants bank and credited to the payers account. If the charged back amount cannot be recovered from the merchants account, or if the merchant refuses or is financially unable to reimburse its bank for the
charged back amount, we may bear the loss for the amount of the refund paid to the payers bank. We could also incur fraud losses as a result of merchant fraud. Merchant fraud occurs when a merchant, rather than a customer, intentionally uses a
stolen or counterfeit card, card number, or other bank account number to process a false sales transaction, or knowingly fails to deliver merchandise or services in an otherwise valid transaction. We may be responsible for any losses for certain
transactions if we are unable to collect from the merchant.

We have established systems and procedures designed to detect and
reduce the impact of consumer fraud and merchant fraud, but we cannot assure you that these measures are or will be effective. To date, we have not incurred any significant losses relating to chargebacks resulting from consumer fraud or merchant
fraud. During the twelve months ended December 31, 2009, our global acquiring revenue represented approximately 31.6% of our total revenue. Our global acquiring revenue may also include fees generated for gateway services as it is becoming more
common to charge the customer a bundled price for transaction services provided. To the extent our global acquiring revenue grows, our potential liability for such chargebacks or merchant fraud increases.

Our revenue and customer relationships could be impacted if we were to lose bank sponsorship.

The credit card associations require a bank sponsor that ultimately assumes chargeback or merchant fraud losses if we were financially
unable to assume such losses. We regularly evaluate bank sponsorship and other relationships with financial institutions. Harris Bank, N.A. currently is our bank sponsor in the United States. Our agreement with Harris Bank renews automatically in
March of each year and requires at least 180 days written notice prior to the expiration of any annual term if either party wishes to exercise its right not to renew the agreement. As of the date of this report, we have not received any notice of
non-renewal from Harris Bank, N.A. Accordingly, this agreement was renewed automatically in March 2009 and will remain in effect through March 2011, unless the parties mutually agree to terminate the agreement prior to any such expiration or either
party exercises its right to terminate the agreement prior to any such expiration based on a material breach by the other party as set forth in the agreement. Outside the United States, we recently signed an agreement with a member bank in Europe to
enable our acquiring offerings in certain countries in Europe. If a bank sponsor were to terminate our agreement, and we are not able to obtain another bank sponsor in a timely manner, we would be unable to provide global acquiring services, either
whole or in part, which could impact our future revenue and customer relationships.

We may not be able to adequately protect our
proprietary technology and may be infringing upon third-party intellectual property rights.

Our success depends upon
our proprietary technology. We rely on a combination of patent, copyright, trademark and trade secret rights, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights.

As part of our confidentiality procedures, we enter into non-disclosure agreements with our employees, contractors, vendors and potential
customers and alliances. Despite these precautions, third parties could copy or otherwise obtain and use our technology without authorization, or develop similar technology independently. Effective protection of intellectual property rights may be
unavailable or limited in foreign countries. We cannot assure you that the protection of our proprietary rights will be adequate or that our competitors will not independently develop similar technology, duplicate our products and services or design
around any patents or other intellectual property rights we hold.



14



---

##### Table of Contents

We also cannot assure you that third parties will not claim that the technology employed in
providing our current or future products and services infringe upon their rights. We have not conducted any search to determine whether any of our products and services or technologies may be infringing upon patent rights of third parties. As the
number of products and services in our market increases and functionalities increasingly overlap, companies such as ours may become increasingly subject to infringement claims. In addition, these claims also might require us to enter into royalty or
license agreements. Any infringement claims, with or without merit, could absorb significant management time and lead to costly litigation. If required to do so, we may not be able to obtain royalty or license agreements, or obtain them on terms
acceptable to us.

If we are not able to fully utilize relationships with our sales alliances, we may experience lower revenue growth
and higher operating costs.

Our future growth will depend in part on the success of our relationships with existing
and future sales alliances that market our products and services to their merchant accounts. If these relationships are not successful or do not develop as quickly as we anticipate, our revenue growth may be adversely affected. For example, most of
the new customer signups for our Authorize.Net platform come from resellers. To some degree, we compete with these resellers and conflicts may arise between the reseller and our direct sales force. While we believe we have been able to minimize any
such conflict, we cannot assure you that conflicts will not increase. Accordingly, we may have to increase our sales and marketing expenses in an attempt to secure additional merchant accounts.

If we unexpectedly lose key management personnel, we may not be able to successfully manage our business and achieve our objectives.

Our success will depend in part upon our ability to retain key management personnel and other key members of
management because of their experience and knowledge regarding the development, opportunities, and challenges of our business. Disruptions in our senior management team may result in increased attrition of our personnel as new reporting
relationships are established and if other companies target our executives. We do not maintain any key-man insurance covering the death or disability of any of our executive officers. While we have an employment contract with Michael A. Walsh, our
President and Chief Executive Officer, none of our current key employees are subject to legal obligations that enable us to retain them for a specific period of time. Competition for qualified personnel can be intense. We may not be successful in
attracting and retaining key employees in the future. Loss of key personnel could have a material adverse effect on our business and results of operations.

Failure to manage future growth effectively may have a material adverse effect on our financial condition and results of operations.

In the event that we experience rapid growth in our operations, a significant strain may be placed upon management, administrative,
operational and financial infrastructure. Our success will depend in part upon the ability of our executive officers to manage growth effectively. Our ability to grow also depends upon our ability to successfully hire, train, supervise, and manage
new employees, obtain financing for our capital needs, expand our systems effectively, allocate our human resources optimally, maintain clear lines of communication between our transactional and management functions and our finance and accounting
functions, and manage the pressures on our management and administrative, operational and financial infrastructure. There can be no assurance that we will be able to accurately anticipate and respond to the changing demands we will face as we
continue to expand our operations, and we may not be able to manage growth effectively or to achieve growth at all. Any failure to manage the future growth effectively could have a material adverse effect on our business, financial condition and
results of operations.

Charges to earnings resulting from the application of the purchase method of accounting might adversely affect
the market value of our common stock.

In accordance with United States generally accepted accounting principles
(GAAP), the Authorize.Net merger which closed on November 1, 2007 was accounted for using the purchase method of accounting, which will result in charges to earnings that could have an adverse impact on the market value of our
common stock. Under the purchase method of accounting, the total estimated purchase price was allocated to Authorize.Nets net tangible assets, identifiable intangible assets or expense for research and development based on their fair values as
of November 1, 2007. The excess of the purchase price over those fair values was recorded as goodwill. We currently estimate that we will incur approximately $21.8 million of incremental annual amortization expense relating to the Authorize.Net
merger during the year ending December 31, 2010. To the extent the value of goodwill or identifiable intangible assets or other long-lived assets may become impaired, we will be required to incur material charges relating to the impairment. These
amortization and potential impairment charges could have a material impact on our results of operations.



15



---

##### Table of Contents

We may pursue strategic acquisitions and our business could be materially and adversely affected if we
fail to adequately integrate acquired businesses.

As part of our future business strategy, we may pursue strategic
acquisitions of complementary businesses or technologies that would provide additional product or service offerings, additional industry expertise, a broader client base or an expanded geographic presence. For example, on November 1, 2007, we
completed the acquisition of Authorize.Net. If we do not successfully integrate a strategic acquisition, or if the benefits of the transaction do not meet the expectations of financial or industry analysts, the market price of our common stock may
decline. Any future acquisition could result in the use of significant amounts of cash, dilutive issuances of equity securities, or the incurrence of debt or amortization expenses related to goodwill and other intangible assets, any of which could
materially adversely affect our business, operating results and financial condition. In addition, acquisitions involve numerous risks, including:



| |  |  | difficulties in assimilating the operations, technologies, products and personnel of an acquired company;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | risks of entering markets in which we have either no or limited prior experiences;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the diversion of managements attention from other business concerns; and
| | - |  | -------------------------------------------------------------------------



| |  |  | the potential loss of key employees of an acquired company.
| | - |  | -----------------------------------------------------------

Our international business is subject to additional foreign risks that could harm our business, results, and financial condition.

Products and services provided to merchants outside the United States accounted for 7.4% and 6.8% of our revenues in the years ended
December 31, 2009 and 2008, respectively. In March 2000, we entered into a joint venture agreement with Japanese partners Marubeni Corporation and Trans-Cosmos, Inc. and established CyberSource K.K. to provide commerce transaction services to
the Japanese market. Conducting business outside of the United States is subject to additional risks that may affect our ability to sell our products and services and result in reduced revenues, including:



| |  |  | changes in regulatory requirements;
| | - |  | -----------------------------------



| |  |  | reduced protection of intellectual property rights;
| | - |  | ---------------------------------------------------



| |  |  | the burden of complying with a variety of foreign laws; and
| | - |  | -----------------------------------------------------------



| |  |  | war, political or economic instability or constraints on international trade.
| | - |  | -----------------------------------------------------------------------------

In addition, some software contains encryption technology that renders it subject to export restrictions and we may become liable to the
extent we violate these restrictions. We might not successfully market, sell or distribute our products and services in local markets and we cannot be certain that one or more of these factors will not materially adversely affect our future
international operations, and consequently, our business, financial condition and operating results.

Also, sales of our
products and services conducted through our subsidiary in the United Kingdom are primarily denominated in Pounds Sterling. We may experience fluctuations in revenues or operating expenses due to fluctuations in the value of the Pounds Sterling
relative to the U.S. Dollar. We do not currently enter into transactions with the specific purpose to hedge against currency exchange fluctuations.

Risks Related To Our Industry

The intense competition in our industry could reduce or eliminate the demand for our
products and services.

The market for our products and services is intensely competitive and subject to rapid
technological change. We expect competition to intensify in the future. We face competition from merchant acquirers, independent sales organizations, and payment processors such as Chase Paymentech, First Data Corporation, and Royal Bank of
Scotland. We also face competition from transaction service providers such as PayPal and Retail Decisions as well as eCommerce providers such as Bertelsmann Financial Services, Digital River, and GSI Commerce Inc. Further, other companies, including
financial services and credit companies may enter the market and provide competing services.



16



---

##### Table of Contents

Many of our competitors have longer operating histories, substantially greater financial,
technical, marketing or other resources, or greater name recognition than we do. Our competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements. Competition could seriously impede
our ability to sell additional products and services on terms favorable to us. Our current and potential competitors may develop and market new technologies that render our existing or future products and services obsolete, unmarketable or less
competitive. Our current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with other solution providers, thereby increasing their ability to address the needs of our existing or
prospective customers. Our current and potential competitors may establish or strengthen cooperative relationships with our current or future channel partners, thereby limiting our ability to sell products and services through these channels. We
expect that competitive pressures may result in the reduction of our prices or our market share or both, which could materially and adversely affect our business, results of operations or financial condition.

Our market is subject to rapid technological change and to compete we must continually enhance our systems to comply with evolving standards.

To remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our products
and services and the underlying network infrastructure. The Internet and the eCommerce industries are characterized by rapid technological change, changes in user requirements and preferences, frequent new product and service introductions embodying
new technologies, and the emergence of new industry standards and practices that could render our technology and systems obsolete. Our success will depend, in part, on our ability to both internally develop and license leading technologies to
enhance our existing products and services and develop new products and services. We must continue to address the increasingly sophisticated and varied needs of our merchants, and respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis. The development of proprietary technology involves significant technical and business risks. We may fail to develop new technologies effectively or to adapt our proprietary technology and systems to
merchant requirements or emerging industry standards. If we are unable to adapt to changing market conditions, merchant requirements or emerging industry standards, we may be forced to compete in different ways or expend significant resources in
order to remain competitive.

The demand for our products and services could be negatively affected by a reduced growth of eCommerce or
delays in the development of the internet infrastructure.

We depend on the growing use and acceptance of the Internet
as an effective medium of commerce by merchants and customers in the United States and internationally. The sale of goods and services over the Internet has gained acceptance more slowly outside of the United States. We cannot be certain that
acceptance and use of the Internet will continue to develop or that a sufficiently broad base of merchants and consumers will adopt, and continue to use, the Internet as a medium of commerce.

The increase in the significance of the Internet as a commercial marketplace may occur more slowly than anticipated for a number of reasons,
including potentially inadequate development of the necessary network infrastructure or delayed development of enabling technologies and performance improvements. If the number of Internet users, or the use of Internet resources by existing users,
continues to grow, it may overwhelm the existing Internet infrastructure. Delays in the development or adoption of new standards and protocols required to handle increased levels of Internet activity could also have a detrimental effect. These
factors could result in slower response times or adversely affect usage of the Internet, resulting in lower numbers of commerce transactions and lower demand for our products and services.

Global economics, political and other conditions may adversely affect trends in consumer spending, which may adversely impact our revenue and
profitability

The global electronic payments industry depends heavily upon the overall level of consumer, business
and government spending. The industry also relies in part on the number and size of consumer transactions. A sustained deterioration in the general economic conditions in the United States or globally may adversely affect our financial performance
by reducing the number of as well as the average purchase amount of transactions involving payment cards. A reduction in the amount of consumer spending could result in a decrease of our revenue and profits.



17



---

##### Table of Contents

We may become subject to government regulation and legal uncertainties that would adversely affect our
operations and financial results.

We are not currently subject to direct regulation by any domestic or foreign
governmental agency, other than regulations applicable to businesses generally, export control laws and laws or regulations directly applicable to eCommerce. However, due to the increasing usage of the Internet, it is possible that a number of laws
and regulations may be applicable or may be adopted in the future with respect to conducting business over the Internet covering issues such as:



| |  |  | taxes;
| | - |  | ------



| |  |  | user privacy;
| | - |  | -------------



| |  |  | pricing;
| | - |  | --------



| |  |  | content;
| | - |  | --------



| |  |  | right to access personal data;
| | - |  | ------------------------------



| |  |  | copyrights;
| | - |  | -----------



| |  |  | distribution; and
| | - |  | -----------------



| |  |  | characteristics and quality of products and services.
| | - |  | -----------------------------------------------------

For example, we believe that our fraud screen service may require us to comply with the Fair Credit Reporting Act (the Act). As a precaution, we have implemented processes that we believe will
enable us to comply with the Act if we were deemed a consumer reporting agency. Complying with the Act requires us to provide information about personal data stored by us. Failure to comply with the Act could result in claims being made against us
by individual consumers and the Federal Trade Commission.

Furthermore, the growth and development of the market for eCommerce
may prompt more stringent consumer protection laws that may impose additional burdens on those companies conducting business online. The adoption of additional laws or regulations may decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for our products and services and increase our cost of doing business.

The
applicability of existing laws governing issues such as property ownership, copyrights, encryption and other intellectual property issues, taxation, libel, export or import matters and personal privacy to the Internet is uncertain. The vast majority
of laws were adopted prior to the broad commercial use of the Internet and related technologies. As a result, they do not contemplate or address the unique issues of the Internet and related technologies. Changes to these laws intended to address
these issues, including some recently proposed changes in the United States regarding taxation and encryption and in the European Union regarding contract formation and privacy, could create uncertainty in the Internet marketplace and impose
additional costs and other burdens. These uncertainties, costs and burdens could reduce demand for our products and services or increase the cost of doing business due to increased litigation costs or increased service delivery costs.

Risks Related to Ownership of Our Common Stock

Potential fluctuations of our quarterly results could cause our stock price to fluctuate or decline.

We expect that our quarterly operating results will fluctuate significantly in the future based upon a number of factors, many of which are not within our control. We base our operating expenses on anticipated market growth and our
operating expenses are relatively fixed in the short term. As a result, if our revenues are lower than we expect, our quarterly operating results may not meet the expectations of public market analysts or investors, which could cause the market
price of our common stock to decline. Our quarterly results may fluctuate in the future as a result of many factors, including the following:



| |  |  | changes in the size and number of transactions processed on behalf of customers as a result of seasonality, success of each customers business,
general economic conditions or regulatory requirements restricting our customers;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to attract new customers and to retain our existing customers;
| | - |  | --------------------------------------------------------------------------



| |  |  | customer acceptance of new products and services we may offer, including our global acquiring business;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | customer confidence in the safety and security of transactions using our services;
| | - |  | ----------------------------------------------------------------------------------



18



---

##### Table of Contents

| |  |  | customer acceptance of our pricing model;
| | - |  | -----------------------------------------



| |  |  | customer acceptance of our software and our professional services offerings;
| | - |  | ----------------------------------------------------------------------------



| |  |  | the success of our sales and marketing programs;
| | - |  | ------------------------------------------------



| |  |  | an interruption with one or more of our processors, other financial institutions and technology service providers;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | seasonality of the retail sector;
| | - |  | ---------------------------------



| |  |  | changes in accounting rules and regulations;
| | - |  | --------------------------------------------



| |  |  | changes in federal, state, and local income tax laws;
| | - |  | -----------------------------------------------------



| |  |  | war or other international conflicts;
| | - |  | -------------------------------------



| |  |  | weakness in the general United States and global economies and financial markets; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | the lack of available capital for our customers and potential future customers.
| | - |  | -------------------------------------------------------------------------------

Other factors that may affect our quarterly results are set forth elsewhere in this section. As a result of these factors, our revenues are
not predictable with any significant degree of certainty. Due to the uncertainty surrounding our revenues and expenses, we believe that quarter-to-quarter comparisons of our historical operating results may not be indicative of our future
performance.

The trading price of our common stock has fluctuated and may continue to fluctuate due to factors outside our control.

The market price for our common stock has been volatile and likely will continue to be volatile in response to
various factors, some of which are outside our control, including the following:



| |  |  | the announcement of new products, services or enhancements by our competitors;
| | - |  | ------------------------------------------------------------------------------



| |  |  | quarterly variations in our competitors results of operations;
| | - |  | ---------------------------------------------------------------



| |  |  | changes in earnings estimates or recommendations by securities analysts;
| | - |  | ------------------------------------------------------------------------



| |  |  | developments in our industry; and
| | - |  | ---------------------------------



| |  |  | short sales, hedging, and other derivative transactions on shares of common stock.
| | - |  | ----------------------------------------------------------------------------------

In addition, the stock market in general, and market for technology companies in particular, have experienced substantial price and volume
fluctuations potentially unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors, as well as general economic, political and financial market conditions may materially and adversely
affect the market price of our common stock.

The anti-takeover provisions in our certificate of incorporation, including the issuance
of authorized preferred stock, could adversely affect the rights of the holders of our common stock.

Anti-takeover
provisions of Delaware law and our Certificate of Incorporation may make a change in control more difficult to finalize, even if a change in control would be beneficial to the stockholders. These provisions may allow our Board of Directors to
prevent changes in our management and controlling interests. Under Delaware law, our Board of Directors may adopt additional anti-takeover measures in the future. One anti-takeover provision that we have is the ability of our Board of Directors to
determine the terms of preferred stock and issue preferred stock without the approval of the holders of the common stock. Our Certificate of Incorporation allows the issuance of up to 5,610,969 shares of preferred stock. As of December 31,
2009, there are no shares of preferred stock outstanding. However, because the rights and preferences of any series of preferred stock may be set by our Board of Directors in its sole discretion without approval of the holders of the common stock,
the rights and preferences of this preferred stock may be superior to those of the common stock. Accordingly, the rights of the holders of common stock may be adversely affected.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

We have received no written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding the end of our 2009 fiscal year that remained unresolved.



19



---

##### Table of Contents

|ITEM 2. | PROPERTIES
|------- | ----------

Facilities

Our headquarters is located in approximately 72,000 square feet of space in Mountain View, California, under a lease
expiring in December 2011. We occupy approximately 23,400 and 39,800 square feet of space in Bellevue, Washington and American Fork, Utah, respectively, with lease expiration dates in 2013. As a result of the acquisition of Authorize.Net in 2007, we
currently lease approximately 10,000 square feet of office space in Marlborough, Massachusetts, which is sublet and expires in 2012. We currently lease approximately 80,000 square feet of office space in Burlington, Massachusetts and approximately
14,000 square feet of office space in American Fork, Utah which expire in 2011 and 2010, respectively. Finally, we also maintain offices in leased space in Reading, United Kingdom, Belfast, Northern Ireland and Singapore.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

The
information required by this item is incorporated by reference to Note 13Litigation and Contingencies to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

No matters were submitted to a vote of our security holders during the fourth quarter of 2009.



20



---

##### Table of Contents

PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Since our initial public offering on June 23, 1999, our common stock has traded on the NASDAQ Global Market under the symbol
CYBS. Since January 1, 2008, our stock has traded on the NASDAQ Global Select market under the symbol CYBS. The following table sets forth the range of high and low closing sales prices of our common stock for the
periods indicated:



|                             |  |      |       |     |   |      
|---------------------------- |  | ---- | ----- | --- | - | -----
|Year ended December 31, 2008 |  | High |       | Low
|First Quarter                |  | $    | 18.50 |     | $ | 12.70
|Second Quarter               |  | $    | 19.53 |     | $ | 14.07
|Third Quarter                |  | $    | 19.15 |     | $ | 13.35
|Fourth Quarter               |  | $    | 15.96 |     | $ | 6.65 
|                             |  |     
|Year ended December 31, 2009 |  | High |       | Low
|First Quarter                |  | $    | 15.22 |     | $ | 9.12 
|Second Quarter               |  | $    | 16.36 |     | $ | 12.99
|Third Quarter                |  | $    | 17.54 |     | $ | 14.24
|Fourth Quarter               |  | $    | 20.55 |     | $ | 15.80

We had approximately
300 shareholders of record as of February 12, 2010. We have not declared or paid any cash dividends on our common stock and presently intend to retain our future earnings to fund the development and growth of our business and, therefore, do not
anticipate paying any cash dividends in the foreseeable future.

Issuer Purchases of Equity Securities

During the fourth quarter of 2009, we did not repurchase any of our outstanding common stock.



21



---

##### Table of Contents

STOCK PERFORMANCE GRAPH

The following line graph compares the yearly percentage change in (i) the cumulative total stockholder return on the Companys
Common Stock since December 31, 2004 with (ii) cumulative total stockholder return on (a) the Nasdaq Stock MarketU.S. Index, and (b) the RDG Internet Composite Index. The comparison assumes an investment of $100 on
December 31, 2004 and reinvestment of dividends, if any. The stock price performance shown on the graph is not necessarily indicative of future price performance.

LOGO

The stock performance graph shall not be deemed incorporated by reference into any filing by us under the Securities Act
of 1933 or the Securities Exchange Act of 1934 except to the extent that we specifically incorporate such information by reference, and shall not otherwise be deemed filed under such Acts.



22



---

##### Table of Contents

|ITEM 6.    SELECTED | FINANCIAL DATA
|------------------- | --------------

The
following selected financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations included
elsewhere in this Form 10-K. The historical results are not necessarily indicative of future results.

SELECTED CONSOLIDATED
FINANCIAL DATA



|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|-------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | ------- | - | ------- | ------- |  | - | ------- | - |  | ---- | ------ | - |  | - | ------ | -
|                                                                                 |  | Year Ended December 31,               |        
|                                                                                 |  | 2009(1)                               |         | 2008(1) |   |         | 2007(1) |  |   | 2006    |   |  | 2005 |       
|                                                                                 |  | (In thousands, except per share data) |        
|Consolidated Statements of Operations Data:                                      |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Revenues                                                                         |  | $                                     | 265,136 |         | $ | 229,026 |         |  | $ | 116,999 |   |  | $    | 70,250 |   |  | $ | 50,511 |  
|Cost of revenues                                                                 |  |                                       | 125,064 |         |   | 111,768 |         |  |   | 62,113  |   |  |      | 34,627 |   |  |   | 20,492 |  
|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Gross profit                                                                     |  |                                       | 140,072 |         |   | 117,258 |         |  |   | 54,886  |   |  |      | 35,623 |   |  |   | 30,019 |  
|Operating expenses:                                                              |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Product development                                                              |  |                                       | 28,504  |         |   | 22,903  |         |  |   | 13,397  |   |  |      | 9,283  |   |  |   | 8,000  |  
|Sales and marketing                                                              |  |                                       | 71,706  |         |   | 68,424  |         |  |   | 25,685  |   |  |      | 14,443 |   |  |   | 11,140 |  
|General and administrative                                                       |  |                                       | 23,884  |         |   | 25,133  |         |  |   | 16,734  |   |  |      | 9,861  |   |  |   | 6,031  |  
|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Total operating expenses                                                         |  |                                       | 124,094 |         |   | 116,460 |         |  |   | 55,816  |   |  |      | 33,587 |   |  |   | 25,171 |  
|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Income (loss) from operations                                                    |  |                                       | 15,978  |         |   | 798     |         |  |   | (930    | ) |  |      | 2,036  |   |  |   | 4,848  |  
|Interest income                                                                  |  |                                       | 257     |         |   | 1,444   |         |  |   | 2,726   |   |  |      | 2,344  |   |  |   | 1,324  |  
|Other income, net                                                                |  |                                       | 208     |         |   | 1,134   |         |  |   | 314     |   |  |      | 341    |   |  |   |       |  
|Income tax provision (benefit)                                                   |  |                                       | 5,478   |         |   | (7,353  | )       |  |   | (319    | ) |  |      | (9,690 | ) |  |   | (3,074 | )
|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Net income                                                                       |  | $                                     | 10,965  |         | $ | 10,729  |         |  | $ | 2,429   |   |  | $    | 14,411 |   |  | $ | 9,246  |  
|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Basic net income per share                                                       |  | $                                     | 0.16    |         | $ | 0.16    |         |  | $ | 0.06    |   |  | $    | 0.42   |   |  | $ | 0.28   |  
|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Diluted net income per share                                                     |  | $                                     | 0.15    |         | $ | 0.15    |         |  | $ | 0.06    |   |  | $    | 0.39   |   |  | $ | 0.26   |  
|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Weighted average number of shares used in computing basic net income per share   |  |                                       | 69,530  |         |   | 69,132  |         |  |   | 40,736  |   |  |      | 34,623 |   |  |   | 33,464 |  
|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Weighted average number of shares used in computing diluted net income per share |  |                                       | 71,945  |         |   | 71,789  |         |  |   | 43,225  |   |  |      | 36,593 |   |  |   | 35,811 |  
|                                                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|                                                                                 | 
|                                                                                 |  | December 31,                          |        
|                                                                                 |  | 2009                                  |         | 2008    |   |         | 2007(1) |  |   | 2006    |   |  | 2005 |       
|                                                                                 |  | (In thousands)                        |        
|Consolidated Balance Sheet Data:                                                 |  |                                       |         |         |   |         |         |  |   |         |   |  |      |        |   |  |   |        |  
|Cash and cash equivalents and short-term investments                             |  | $                                     | 128,044 |         | $ | 73,292  |         |  | $ | 40,393  |   |  | $    | 54,944 |   |  | $ | 47,001 |  
|Working capital                                                                  |  |                                       | 119,629 |         |   | 63,100  |         |  |   | 32,696  |   |  |      | 60,286 |   |  |   | 53,234 |  
|Total assets                                                                     |  |                                       | 596,462 |         |   | 559,196 |         |  |   | 537,747 |   |  |      | 87,043 |   |  |   | 65,327 |  
|Total stockholders equity                                                       |  |                                       | 549,707 |         |   | 517,953 |         |  |   | 503,214 |   |  |      | 78,628 |   |  |   | 56,933 |  



|(1) | The 2007 Selected Consolidated Financial Data includes the balance sheet of Authorize.Net as of December 31, 2007 and the operating results of Authorize.Net for
the period from November 1, 2007, the date of acquisition, to December 31, 2007. The 2009, 2008 and 2007 Selected Consolidated Financial Data also includes restructuring and other non-recurring charges of approximately $1.5 million, $1.0
million and $1.8 million, respectively, which are included in general and administrative expenses.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



23



---

##### Table of Contents

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this document.

Overview

CyberSource Corporation provides electronic payment and risk management solutions. Our solutions enable electronic payment processing for
Web, call center, and point-of-sale environments. We partner with and connect to a large network of payment processors and other payment service providers to offer merchants a single source solution that simplifies electronic payment management. Our
payment solutions allow eCommerce merchants to accept a wide range of online payment options, from credit cards and electronic checks, to global payment options and emerging payment types. We also offer industry leading risk management and other
solutions to help online merchants address complexities such as credit card fraud, online tax requirements, and export controls. Our professional services help to design, integrate, and optimize commerce transaction processing systems for merchants.

We primarily derive our revenues from monthly commerce transaction processing fees, global acquiring fees, support service
fees and set-up fees. Key operating metrics that members of our senior management regularly review to evaluate our financial results include customer-base size, transaction volume, new customer sign-ups, and authorization dollars processed. As of
December 31, 2009, approximately 295,000 businesses used our solutions, an increase of approximately 42,000 customers since December 31, 2008. For the year ended December 31, 2009, we processed approximately 2.5 billion
transactions. The dollar value of all credit card authorization requests we processed during the year ended December 31, 2009 was approximately $120.4 billion. The dollar value of all credit card authorization requests we processed as the
merchant acquirer during the year ended December 31, 2009 was approximately $3.3 billion. As the dollar value of credit card authorization requests we process as the merchant acquirer increases, we expect our global acquiring fees to increase
and our gross margins to possibly decrease; and, as the dollar value of credit card authorization requests we process as the merchant acquirer decreases, we expect our global acquiring fees to decrease.

We expect to continue our growth trend of expanding our international capabilities, enhancing our risk and security management offerings,
and increasing the number of our resellers and partner channels. International expansion represents an important opportunity for us to grow our business footprint. In Europe, we recently signed an agreement with a member bank to enable our acquiring
offerings in certain countries in Europe, and also separately announced plans in February 2010 to invest more than $2 million into our existing development center in Northern Ireland. In Asia, we opened a sales office in Singapore in May 2009. We
continue to enhance our fraud solutions with new features such as device fingerprinting and advanced levels of automation to increase the efficiency of order review and reduce fraud. Our channel partner program consisting of approximately 4,700
resellers and affiliate partners have become an increasingly important part of our sales strategy. We believe that investing in these channel relationships will attract new resellers and partners as well as strengthen our existing relationships. We
signed approximately 2,100 new resellers and affiliate partners during 2009.

On October 22, 2009, we announced changes
to our senior management. William S. McKiernan resigned as our Chief Executive Officer effective January 1, 2010. Mr. McKiernan remains with the company as Executive Chairman. Michael A. Walsh, formerly our Senior Vice President of
Worldwide Sales, became our President and Chief Executive Officer, effective January 1, 2010. In addition, the employment of Scott R. Cruickshank, previously our President and Chief Operating Officer, terminated as of October 22, 2009.

Critical Accounting Policies

In June 2009, the Financial Accounting Standards Board (FASB) established the Accounting Standards Codification (ASC) as the source of authoritative GAAP recognized by the
FASB. The ASC supersedes all existing U.S. accounting standards; all other accounting literature not included in the ASC (other than Securities and Exchange Commission guidance for publicly-traded companies) is considered non-authoritative. The ASC
was effective for interim and annual reporting periods ending after September 15, 2009. The adoption of the ASC changed our references to U.S. GAAP but did not have a material impact on our consolidated financial statements.

Our financial statements are based on the selection and application of significant accounting policies, which require management to make
significant estimates and assumptions. We believe that the following are the more critical judgment areas in the application of our accounting policies that currently affect our financial condition and results of operations.



24



---

##### Table of Contents

Revenue Recognition

We recognize revenue in accordance with ASC Topic 605, Revenue Recognition (ASC 605). ASC 605 requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectibility
is reasonably assured. Determination of criteria (4) is based on managements judgments regarding the collectibility of fees. Revenue associated with each type of transaction service fee is recognized separately as the respective service
is performed. Transaction and global acquiring revenues are recognized in the period in which the transactions occur. Support service fees are recognized as the related services are provided and costs are incurred. Set-up fees are deferred and
recognized over the expected life of the merchant to the extent that the life can be estimated or, if not estimable, then over the contract period. Should changes in conditions cause management to determine these criteria are not met for certain
future transactions, revenue recognized for any reporting period could be adversely affected.

We derive a significant portion
of our transaction processing revenues from global acquiring fees charged to merchants for payment processing services. Our fees, which are primarily a percentage of the dollar amount of each transaction processed, are based upon the merchants
monthly charge volume and risk profile. In addition, we record revenues for miscellaneous services related to global acquiring, such as fees for processing credit card chargebacks. In accordance with ASC Subtopic 605-45, Principal Agent
Considerations, we recognize these fees on a gross basis as we are the primary agent in the transaction in the period the merchants transactions are processed. Related interchange fees paid to card issuing banks and assessments paid to
credit card associations are recognized in cost of revenues at that time.

Accounts Receivable

We maintain allowances for doubtful accounts for estimated losses resulting from the potential inability of our customers to make required
payments as well as for potential sales returns. If the financial condition of our customers was to deteriorate, resulting in their inability to make payments, additional allowances may be required. These estimates are based on historical bad debt
experience and other known factors. If the historical data we used to determine these estimates does not properly reflect future losses, additional allowances may be required.

Reserve for Merchant Losses

We have potential liability for certain transactions processed through our global acquiring services if the payments associated with such transactions are rejected, refused, or returned for reasons such
as consumer fraud or billing disputes. For instance, if a billing dispute between a merchant and payer is not ultimately resolved in favor of the merchant, the disputed transaction may be charged back to the merchants bank and credited to the
payers account. If the charged back amount cannot be recovered from the merchants account, or if the merchant refuses or is financially unable to reimburse its bank for the charged back amount, we may bear the loss for the amount of the
refund paid to the payers bank. We could also incur fraud losses as a result of merchant fraud. Merchant fraud occurs when a merchant, rather than a customer, intentionally uses a stolen or counterfeit card, card number, or other bank account
number to process a false sales transaction, or knowingly fails to deliver merchandise or services in an otherwise valid transaction. We may be responsible for any losses for certain transactions if we are unable to collect from the merchant. We
evaluate the merchants risk for potential losses based on historical experience and other relevant factors and record a loss reserve accordingly. If the data we use to determine potential losses does not properly reflect future losses,
additional reserves may be required.

Legal Contingencies

We are currently involved in certain legal proceedings and are required to assess the likelihood of any adverse judgments or outcomes of
these proceedings as well as potential ranges of probable losses. A determination of the amount of accruals required, if any, for these contingencies is made after careful analysis. As discussed in Note 13 of our consolidated financial statements,
as of December 31, 2009, we do not believe our current proceedings will have a material impact on our consolidated financial condition, results of operations or cash flows. It is possible, however, that future results of operations for any
particular quarter or annual period could be materially affected by changes in our assumptions or as a result of the effectiveness of our strategies related to these proceedings.

Accounting for Income Taxes

We account for income taxes using the liability method, which requires the recognition of deferred tax assets or liabilities for the tax-effected temporary differences between the financial reporting and
tax bases of our assets and liabilities, and for net operating loss and tax credit carryforwards.



25



---

##### Table of Contents

In evaluating our ability to realize our deferred tax assets we consider all available
positive and negative evidence including our past operating results and our forecast of future taxable income. In determining future taxable income, we make assumptions to forecast federal, state, and international operating income, the reversal of
temporary differences, and the implementation of any feasible and prudent tax planning strategies. These assumptions require significant judgment regarding the forecasts of future taxable income, and are consistent with the forecasts used to manage
our business. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized on a more likely than not basis. During 2008, we recorded an income tax benefit of approximately $7.4 million.
This benefit included a $10.3 million reduction of our remaining valuation allowance related to our deferred tax assets as we have determined that these assets will more likely than not be realized.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation  Stock Compensation (ASC 718). Total stock-based compensation expense
recognized in the consolidated statement of income for the years ended December 31, 2009, 2008 and 2007 was $7.9 million, $9.5 million and $7.0 million, respectively, before income taxes. As of December 31, 2009, total unrecognized
stock-based compensation expense related to non-vested stock options was approximately $16.4 million, which is expected to be recognized over a weighted average period of approximately 2.54 years.

Under the fair value recognition provisions of ASC 718, we used the Black-Scholes option valuation model to estimate stock-based
compensation expense at the grant date based on the fair value of the award and we will recognize the expense ratably over the requisite service period of the award. Determining the appropriate fair value model and assumptions used in calculating
the fair value of stock-based awards requires judgment, including estimating stock price volatility, forfeiture rates and expected life.

Long-Lived Assets

ASC Topic 350, IntangiblesGoodwill and
Other (ASC 350) requires that we perform tests for impairment of our goodwill annually and between annual tests in certain circumstances. As of December 31, 2009, we had recorded goodwill in connection with our acquisition of
Authorize.Net with a carrying value of approximately $289.3 million. Significant judgments could be required to evaluate goodwill for impairment in the future including the determination of reporting units, estimating future cash flows, determining
appropriate discount rates and other assumptions. We evaluate the goodwill related to the Authorize.Net acquisition on an annual basis as of July 31 or when indicators of impairment may exist.

ASC Section 360-10-35, Impairment or Disposal of Long-Lived Assets (ASC 360-10-35) requires that we perform
tests for impairment of our intangible assets subject to amortization annually and more frequently whenever events or circumstances suggest that our intangible assets may be impaired. We evaluate the intangible assets related to the Authorize.Net
acquisition on an annual basis as of July 31 or when indicators of impairment may exist. As of December 31, 2009, we had recorded intangible assets in connection with our acquisition of Authorize.Net, with a carrying value of approximately
$103.4 million, consisting of partner contracts and related relationships, merchant contracts and related relationships, existing technology, trade name and processor relationships. The value of the partner contracts and related relationships as
well as the merchant contracts and related relationships were derived by considering, among other factors, the expected income and discounted cash flows to be generated from such contracts and relationships. The value of the existing technology was
derived by considering, among other factors, the expected income and discounted cash flows to be generated, taking into account risks related to the characteristics and applications of the technology and assessments of the life cycle state of the
technology. The value of the trade name was derived by considering, among other factors, expected income and discounted cash flows to be generated, also taking into account the expected period in which the company intends to utilize the trade name.
The value of the processor relationships was derived by considering the expected cost that would be incurred to establish and build connections with the processors.

To evaluate potential impairment, ASC 350 and ASC 360-10-35 require us to assess whether the estimated fair value of our goodwill and intangible assets are greater than their carrying value at the time of
the test. Accordingly, there could be significant judgment in determining the fair values attributable to our goodwill and intangible assets, including the determination of reporting units, estimating future cash flows, determining appropriate
discount rates and other assumptions.

As we are required to periodically evaluate our goodwill and intangible asset balances
for impairment, if we incur impairments to our intangible assets, it would have an adverse impact on our future earnings.



26



---

##### Table of Contents

Results of Operations

The following table sets forth certain items in our consolidated statements of income expressed as a percentage of revenues for the periods indicated:



|                               |  |                         |   |  |       |   |  |       |  
|------------------------------ |  | ----------------------- | - |  | ----- | - |  | ----- | -
|                               |  | Year Ended December 31, |  
|                               |  | 2009                    |   |  | 2008  |   |  | 2007  |  
|Revenues                       |  | 100.0                   | % |  | 100.0 | % |  | 100.0 | %
|Cost of revenues               |  | 47.2                    |   |  | 48.8  |   |  | 53.1  |  
|                               |  |                         |   |  |       |   |  |       |  
|Gross profit                   |  | 52.8                    |   |  | 51.2  |   |  | 46.9  |  
|Operating expenses:            |  |                         |   |  |       |   |  |       |  
|Product development            |  | 10.8                    |   |  | 10.0  |   |  | 11.5  |  
|Sales and marketing            |  | 27.0                    |   |  | 29.9  |   |  | 22.0  |  
|General and administrative     |  | 9.0                     |   |  | 11.0  |   |  | 14.2  |  
|                               |  |                         |   |  |       |   |  |       |  
|Total operating expenses       |  | 46.8                    |   |  | 50.9  |   |  | 47.7  |  
|                               |  |                         |   |  |       |   |  |       |  
|Income (loss) from operations  |  | 6.0                     |   |  | 0.3   |   |  | (0.8  | )
|Other income, net              |  | 0.1                     |   |  | 0.5   |   |  | 0.3   |  
|Interest income                |  | 0.1                     |   |  | 0.7   |   |  | 2.3   |  
|                               |  |                         |   |  |       |   |  |       |  
|Income before income taxes     |  | 6.2                     |   |  | 1.5   |   |  | 1.8   |  
|Income tax provision (benefit) |  | 2.1                     |   |  | (3.2  | ) |  | (0.3  | )
|                               |  |                         |   |  |       |   |  |       |  
|Net income                     |  | 4.1                     | % |  | 4.7   | % |  | 2.1   | %
|                               |  |                         |   |  |       |   |  |       |  

Years Ended December 31, 2009 and 2008

Revenues.    Revenues increased to $265.1 million in 2009, an increase of approximately $36.1 million or 15.8% as
compared to $229.0 million in 2008. The increase in revenues was primarily from new customers as well as an increase in total transactions processed. Revenues from new customers that entered into contracts during the twelve months ended
December 31, 2009 represented approximately 9% of total revenues for the year ended December 31, 2009; while revenues from existing customers represented approximately 91% of total revenues for the year ended December 31, 2009.
Revenues from new customers that entered into contracts during the twelve months ended December 31, 2008 represented approximately 10% of total revenues for the year ended December 31, 2008; while revenues from existing customers
represented approximately 90% of total revenues for the year ended December 31, 2008. We added approximately 138,000 gross and 42,000 net new customers during 2009, as compared to approximately 106,000 gross and 25,000 net new customers during
2008.

We processed approximately 2.5 billion transactions in 2009 as compared to approximately 1.9 billion transactions in
2008, an increase of approximately 28%. The dollar value of all credit card authorization requests we processed in 2009 was approximately $120 billion, as compared to approximately $109 billion for 2008, an increase of approximately 10%.

Global acquiring revenues were approximately $83.8 million, or 31.6% of our revenues for the year ended December 31, 2009, as
compared to approximately $78.5 million, or 34.3% for the year ended December 31, 2008. Our global acquiring revenue may also include fees generated for gateway services as it is common to charge the customer a bundled price for global
acquiring and gateway services. We had approximately 6,600 global acquiring customers as of December 31, 2009 as we added approximately 3,750 new acquiring customers during the year ended December 31, 2009. We had approximately 4,700
global acquiring customers as of December 31, 2008 as we added approximately 3,900 new acquiring customers during the year ended December 31, 2008. The dollar value of all credit card authorization requests we processed as the merchant
acquirer for the year ended December 31, 2009 was approximately $3.3 billion, as compared to approximately $2.6 billion for the year ended December 31, 2008, an increase of approximately 26.9%.

Revenues from our European operations were $19.7 million and $15.5 million for the years ended December 31, 2009 and 2008,
respectively, and accounted for approximately 7.4% and 6.8% of our revenues for the years ended December 31, 2009 and 2008, respectively. Revenues from our European operations consist primarily of commerce transaction fees as in 2009 we were
unable to offer acquiring services in Europe due to the lack of a sponsor bank. Transactions processed by our European operations were approximately 621.9 million transactions, or 24.9% of total transactions processed, for the year ended
December 31, 2009 as compared to approximately 404.4 million transactions, or 21.3% of total transactions processed, for the year ended December 31, 2008, an increase of approximately 53.8%.



27



---

##### Table of Contents

Cost of Revenues.    Cost of revenues consist primarily of costs
incurred in the delivery of eCommerce transaction services, including personnel costs in our service delivery and customer support functions, processing and interchange fees paid relating to our global acquiring services, other third-party fees,
depreciation of capital equipment used in our network infrastructure and costs related to the hosting of our servers at third-party hosting centers in the United States and the United Kingdom. Cost of revenues was $125.1 million or 47.2% of revenues
in 2009, as compared to $111.8 million or 48.8% of revenues in 2008. The increase in absolute dollars is primarily due to an increase in headcount and related compensation expense of approximately $4.6 million, an increase in interchange fees
paid relating to our global acquiring services of approximately $3.2 million, an increase in depreciation expense of approximately $1.2 million, and an increase in other third-party fees of approximately $1.8 million. The decrease in cost of
revenues as a percentage of revenues is due primarily to efficiencies resulting from the increase in transactions processed as well as the increase in revenues.

Product Development.    Product development expenses consist primarily of compensation and related costs of employees engaged in the research, design and development of new
services, and to a lesser extent, facility costs and related overhead. Product development expenses increased to $28.5 million in 2009 from $22.9 million in 2008, an increase of 24.5%. The increase in absolute dollars is primarily due to an
increase in headcount and related compensation expense of approximately $3.6 million and an increase in depreciation expense of approximately $0.4 million. As a percentage of revenues, product development expenses increased to 10.8% in 2009 as
compared to 10.0% in 2008. The increase is primarily due to the increase in headcount to support existing and new development projects for the year ended December 31, 2009, offset to a certain extent, by the increase in revenues. We expect
product development expenses will increase in absolute dollars during 2010 as we anticipate that we will increase headcount to support existing and additional development projects. As a percentage of revenues, we expect product development expenses
in 2010 to be relatively consistent as compared to 2009 due primarily to expected revenue growth.

Sales and
Marketing.    Sales and marketing expenses consist primarily of compensation of sales and marketing personnel, commissions paid to outside sales agents, market research and advertising costs, and, to a lesser extent, facility
costs and related overhead. Sales and marketing expenses increased to $71.7 million in 2009 from $68.4 million in 2008, an increase of 4.8%. The increase in absolute dollars is primarily due to an increase in commissions paid to outside sales agents
of approximately $2.1 million and an increase in headcount and related compensation expense of approximately $2.6 million, offset by a decrease of approximately $2.1 million in intangible asset amortization expense related to the Authorize.Net trade
name, partner contracts and related relationships as well as merchant contracts and related relationships. As a percentage of revenues, sales and marketing expenses decreased to 27.0% in 2009 as compared to 29.9% in 2008. The decrease is primarily
due to the increase in revenues and a decrease in amortization expense, offset to a certain extent, by the increase in commissions paid to outside sales agents and the increase in compensation expense. We expect that sales and marketing expenses
will increase in absolute dollars during 2010 due primarily to anticipated increases in commissions paid to outside sales agents and increases in headcount to support our expected revenue growth. As a percentage of revenues, we expect sales and
marketing expenses in 2010 to be relatively consistent as compared to 2009 due primarily to expected revenue growth.

General and Administrative.    General and administrative expenses consist primarily of compensation for executive and administrative personnel, fees for outside professional services and, to a lesser extent,
facility costs and related overhead. General and administrative expenses decreased to $23.9 million in 2009 from $25.1 million in 2008, a decrease of 5.0%. The decrease is primarily due to a reversal of stock compensation expense of approximately
$2.1 million relating to a stock option grant that was cancelled in the fourth quarter prior to it vesting, offset by an increase of approximately $1.0 million in outside professional fees. For the years ended December 31, 2009 and 2008, we
recorded restructuring charges of approximately $1.5 million and $1.0 million, respectively, as a result of updating our assumptions associated with the excess office space in Burlington, Massachusetts and American Fork, Utah. As a percentage of
revenues, general and administrative expenses, excluding restructuring charges, decreased to 8.4% in 2009 as compared to 10.6% in 2008. The percentage decrease is primarily due to the increase in revenues during 2009 as well as the decrease in
stock-based compensation expense, offset to a certain extent by the increase in outside professional fees. We expect general and administrative expenses to increase in absolute dollars in 2010 due primarily to an anticipated increase in stock-based
compensation expense. As a percentage of revenues, we expect general and administrative expenses in 2010 to be relatively consistent as compared to 2009 due primarily to expected revenue growth.

Other Income, Net.Other income, net consists primarily of joint venture income from CyberSource K.K. and
other miscellaneous gains and losses. Other income, net was approximately $0.2 million for the year ended December 31, 2009, as compared to approximately $1.1 million for the year ended December 31, 2008. The decrease is primarily due to a
decrease in gains due to foreign currency fluctuations of approximately $1.2 million, offset by an increase in proceeds from a legal settlement of approximately $0.2 million. Other income, net for the year ended December 31, 2009 consisted of
approximately $0.4 million of income from CyberSource K.K and approximately $0.2 million of proceeds from a legal settlement, offset by approximately $0.4 million of losses due to foreign currency fluctuations.



28



---

##### Table of Contents

Interest Income.    Interest income which consists of interest
earnings on cash and cash equivalents decreased to $0.3 million in 2009 from $1.4 million in 2008, a decrease of 82.2%. The decrease is primarily due to lower investment yields. We expect interest income in 2010 to be relatively consistent with
2009.

Income Tax Provision (Benefit).    We recorded an income tax provision of $5.5 million in
2009 as compared to an income tax benefit of $7.4 million in 2008. The increase in income tax provision is primarily due to higher pre-tax income for the year ended December 31, 2009 as well as the fact that included in the $7.4 million income
tax benefit for the year ended December 31, 2008 was a $10.3 million reversal of the remaining valuation allowance related to our deferred tax assets, offset by amounts accrued for our estimated 2008 federal, state and foreign income tax
liabilities. The reversal of the valuation allowance was based on our analysis of our deferred tax assets that we expect to realize on a more likely than not basis.

As of December 31, 2009, we had federal and state net operating loss carryforwards of approximately $148.4 million and $49.3 million, respectively. Of these amounts, $43.5 million and $9.5 million,
respectively, represent tax deductions from stock option compensation which will be recorded as an adjustment to additional paid-in capital when they reduce taxes payable. If we are not able to use them, the federal and state net operating loss
carryforwards will expire in 2013 through 2024. Internal Revenue Code Section 382 imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of a corporations ownership change, as defined in
the Internal Revenue Code. Our ability to utilize net operating loss carryforwards may be limited if such an ownership change occurs.

Years Ended December 31, 2008 and 2007

Revenues.    Revenues increased to
$229.0 million in 2008, an increase of approximately $112.0 million or 95.8% as compared to $117.0 million in 2007. Approximately 79% of the increase in revenues was attributable to Authorize.Net. Approximately 16% of the increase in revenues was
from existing customers, primarily resulting from an increase in global acquiring services revenue as well as an increase in transaction volumes processed. The remaining increase in revenues was from new customers that entered into contracts during
the twelve months ended December 31, 2008. We processed approximately 1.9 billion transactions in 2008 as compared to approximately 1.2 billion transactions in 2007, an increase of approximately 54%. Approximately 66% of the increase in
transaction volumes was attributable to Authorize.Net.

Global acquiring revenues were approximately $78.5 million, or 34.3%
of our revenues for the year ended December 31, 2008, as compared to approximately $45.8 million, or 39.2% for the year ended December 31, 2007.

Cost of Revenues.    Cost of revenues increased to $111.8 million or 48.8% of revenues in 2008 from $62.1 million or 53.1% of revenues in 2007. The increase in absolute
dollars is primarily due to higher processing fees paid to third parties such as the credit card issuing banks, payment processors and card associations related to our global acquiring services. These costs are variable and increase in absolute
dollars as the related revenue increases and decrease as the related revenue decreases. In addition, cost of revenues in 2008 includes Authorize.Net cost of revenues for the entire year as well as approximately $5.8 million of intangible asset
amortization expense related to existing technology and processor relationships resulting from our acquisition of Authorize.Net. The decrease in cost of revenues as a percentage of revenues is due primarily to efficiencies resulting from the
increase in transactions processed as well as the increase in revenues from operating Authorize.Net for the entire year and from other existing and new customers.

Product Development.    Product development expenses increased to $22.9 million in 2008 from $13.4 million in 2007, an increase of 71.0%. The increase in absolute dollars
is primarily due to an increase in headcount and related compensation expense of approximately $8.1 million. As a percentage of revenues, product development expenses decreased to 10.0% in 2008 as compared to 11.5% in 2007. The decrease is primarily
due to the increase in revenues from operating Authorize.Net for the entire year as well as from other existing and new customers, offset to a certain extent by the increase in compensation expense due to the increase in headcount during 2008.

Sales and Marketing.    Sales and marketing expenses increased to $68.4 million in 2008 from $25.7
million in 2007, an increase of 166.4%. The increase in absolute dollars is primarily due to an increase in commissions paid to outside sales agents of approximately $16.6 million, related to sales of our Authorize.Net services for the entire year
and an increase in headcount and related compensation expense of approximately $4.5 million. Also as a result of our acquisition of Authorize.Net, sales and marketing expenses in 2008 included an increase of approximately $19.9 million of intangible
asset amortization expense related to the Authorize.Net trade name, partner contracts and related relationships as well as merchant contracts and related relationships. As a percentage of revenues, sales and marketing expenses increased to 29.9% in
2008 as compared to 22.0% in 2007. The increase is primarily due to the increase in commissions paid to outside sales agents, the increase in compensation



29



---

##### Table of Contents

expense due to the increase in headcount, and the increase in amortization expense, offset to a certain extent, by the increase in revenues resulting from operating Authorize.Net for the entire
year and from other existing and new customers.

General and Administrative.    General and
administrative expenses increased to $25.1 million in 2008 from $16.7 million in 2007, an increase of 50.2%. The increase is primarily due to an increase in headcount and related compensation expense of approximately $5.4 million in connection with
our acquisition of Authorize.Net as well as increases of approximately $1.1 million, $0.7 million and $0.7 million in outside professional fees, bad debt expense and depreciation expense, respectively. In December of 2007, we recorded a
restructuring charge of approximately $1.8 million in the fourth quarter of 2007 as a result of the closure of BidPay. This charge included $1.6 million for the write-off of intangible assets, net of deferred tax liabilities, $0.1 million of
severance related to terminated employees and $0.1 million for the impairment of property and equipment. As a percentage of revenues, general and administrative expenses, excluding restructuring charges, decreased to 10.6% in 2008 as compared to
12.7% in 2007. The percentage decrease is primarily due to the increase in revenues during 2008 from operating Authorize.Net for the entire year as well as from other existing and new customers, offset to a certain extent, by the increases in
compensation expense and outside professional fees.

Other Income, Net.Other income, net for
2008 consisted primarily of joint venture income from CyberSource K.K. of approximately $0.3 million and exchange rate gains of approximately $0.8 million. Other income, net for 2007 consisted primarily of joint venture income from CyberSource K.K.
of approximately $0.2 million and exchange rate gains of approximately $0.1 million.

Interest
Income.    Interest income which consists of interest earnings on cash and cash equivalents decreased to $1.4 million in 2008 from $2.7 million in 2007, a decrease of 47.0%. The decrease is primarily due to lower investment
yields.

Income Tax Benefit.    We recorded an income tax benefit of $7.4 million in 2008 as
compared to $0.3 million in 2007. Included in the $0.3 million income tax benefit recorded in 2007 was a $1.0 million reversal of the valuation allowance related to a portion of our deferred tax assets, which was recorded in the fourth quarter of
2007, offset by amounts accrued for our estimated 2007 federal, state and foreign income tax liabilities. Also in 2007, as a result of our acquisition of Authorize.Net, we recorded as an adjustment to goodwill a $34.5 million reduction in the
valuation allowance related to a portion of our deferred tax assets.

Liquidity and Capital Resources

Our cash and cash equivalents were approximately $128.0 million as of December 31, 2009 compared to approximately $73.3 million as of
December 31, 2008, an increase of approximately $54.8 million. This increase is primarily due to the following (in thousands):



|                                       |  |                        |         |   |      |   |         |  
|-------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | -
|                                       |  | Year EndedDecember 31, |        
|                                       |  | 2009                   |         |   | 2008 |  
|Cash provided by operating activities  |  | $                      | 55,480  |   |      | $ | 50,236  |  
|Proceeds from issuance of common stock |  |                        | 11,972  |   |      |   | 7,161   |  
|Purchases of equipment                 |  |                        | (13,589 | ) |      |   | (11,847 | )
|Repurchases of common stock            |  |                        |        |   |      |   | (10,703 | )

We believe that our cash
and cash equivalents balance as of December 31, 2009 will be sufficient to meet our working capital and capital requirements for at least the next twelve months. Our future capital requirements will depend on many factors including the level of
investment we make in new businesses, new products or new technologies. We currently have no agreements or understandings with respect to any future investments or acquisitions. To the extent that our existing cash resources and future earnings are
insufficient to fund our future activities, we may need to obtain additional equity or debt financing. Additional funds may not be available or, if available, we may not be able to obtain them on favorable terms.

At December 31, 2009, we had no indebtedness for borrowed money. At December 31, 2009, we had an unsecured letter of credit in the
amount of $1.0 million per the terms of the operating lease related to the Burlington, Massachusetts office facility we acquired through the acquisition of Authorize.Net.



30



---

##### Table of Contents

The following is a table summarizing our significant contractual obligations as of
December 31, 2009, consisting of future minimum lease payments under all non-cancelable operating leases (in thousands):



|                        |  |       |        |                 |   |            |  |            |       |  |   |    
|----------------------- |  | ----- | ------ | --------------- | - | ---------- |  | ---------- | ----- |  | - | ---
|Contractual obligations |  | Total |        | Less than1 year |   | 1  3years |  | 3  5years
|Operating leases        |  | $     | 12,642 |                 | $ | 5,240      |  | $          | 6,998 |  | $ | 404
|Purchase obligations    |  |       | 1,404  |                 |   | 702        |  |            | 702   |  |   |   
|                        |  |       |        |                 |   |            |  |            |       |  |   |    
|Total commitments       |  | $     | 14,046 |                 | $ | 5,942      |  | $          | 7,700 |  | $ | 404
|                        |  |       |        |                 |   |            |  |            |       |  |   |    

We have excluded tax contingencies totaling
approximately $1.8 million from the table above as there is a high degree of uncertainty regarding the timing of future cash outflows and, as a result, we are not able to make reasonably reliable estimates of the period of cash settlement with the
respective taxing authorities.

Off-Balance Sheet Arrangements

As of December 31, 2009, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Recent Pronouncements

In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities
(ASU 2009-17). The amendments in this update are the result of Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R), which was issued in June 2009. ASU 2009-17 amends the
consolidation guidance for variable-interest entities under ASC Subtopic 810-10. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should
consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. ASU 2009-17 will be effective for us as of January 1, 2010 and for interim and annual reporting
periods thereafter. Earlier application is prohibited. The adoption of ASU 2009-17 is not expected to have a significant impact on our consolidated financial statements.

In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605) (ASU 2009-13) which addresses arrangements with multiple-deliverable revenue
arrangements under ASC Subtopic 605-25. It provides guidance on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated. It (1) requires an entity to allocate revenue in an arrangement using
estimated selling price of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price and (2) eliminates the use of the residual method and requires an entity to allocate revenue using the
relative selling price method. We will apply ASU 2009-13 on a prospective basis for revenue arrangements entered into or materially modified beginning on or after January 1, 2011. Earlier application is permitted. We have not yet determined the
effect on our consolidated financial statements, if any, upon the adoption of ASU 2009-13.



|ITEM 7A. | QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

We provide our services to customers primarily in the United States and, to a lesser extent, in Europe and elsewhere throughout the world. As a result, we are exposed to foreign currency risk. The
majority of sales are currently made in U.S. dollars or Pounds Sterling. A strengthening of the dollar or the pound sterling could make our products less competitive in foreign markets. We also have non-functional currency cash balances that
are exposed to foreign currency risk. For example, a hypothetical 20% adverse change in exchange rates at December 31, 2009 would result in an approximate $1.2 million decrease in our cash balances. Currently, we do not have any
arrangements to hedge against the effects of currency fluctuations. For the year ended December 31, 2009, we incurred approximately $0.4 million of losses due to foreign currency fluctuations.

Our interest income is sensitive to changes in the general level of U.S. interest rates. All of our cash equivalents are presented at fair
value on our consolidated balance sheets. We generally invest our excess cash in money market funds. Due to the nature of our cash equivalents, which are money market funds, we have concluded that there is no material market risk exposure.



31



---

##### Table of Contents

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CYBERSOURCE CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS



|                                                        |  |   
|------------------------------------------------------- |  | --
|Report of Independent Registered Public Accounting Firm |  | 33
|                                                        | 
|Consolidated Balance Sheets                             |  | 34
|                                                        | 
|Consolidated Statements of Income                       |  | 35
|                                                        | 
|Consolidated Statements of Stockholders Equity         |  | 36
|                                                        | 
|Consolidated Statements of Cash Flows                   |  | 37
|                                                        | 
|Notes to Consolidated Financial Statements              |  | 38



32



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

CyberSource Corporation

We have audited the accompanying consolidated balance
sheets of CyberSource Corporation as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders equity and cash flows for each of the three years in the period ended December 31, 2009. Our audits
also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements
referred to above present fairly, in all material respects, the consolidated financial position of CyberSource Corporation at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), CyberSource Corporations internal control over financial reporting as of December 31, 2009, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2010 expressed an unqualified opinion thereon.

/s/    ERNST & YOUNG LLP

San Jose, California

February 26, 2010



33



---

##### Table of Contents

CYBERSOURCE CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)



|                                                                                                |  |              |          |   |      |   |          |  
|----------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                                                                                |  | December 31, |         
|                                                                                                |  | 2009         |          |   | 2008 |  
|ASSETS                                                                                          |  |              |          |   |      |   |          |  
|Current assets:                                                                                 |  |              |          |   |      |   |          |  
|Cash and cash equivalents                                                                       |  | $            | 128,044  |   |      | $ | 73,292   |  
|Trade accounts receivable, net of allowances of $1,320 and $1,070 at December 31, 2009 and 2008 |  |              | 22,878   |   |      |   | 18,251   |  
|Prepaid expenses and other current assets                                                       |  |              | 7,797    |   |      |   | 5,310    |  
|Deferred income taxes                                                                           |  |              | 3,770    |   |      |   | 2,635    |  
|                                                                                                |  |              |          |   |      |   |          |  
|Total current assets                                                                            |  |              | 162,489  |   |      |   | 99,488   |  
|Property and equipment, net                                                                     |  |              | 21,022   |   |      |   | 16,188   |  
|Intangible assets, net                                                                          |  |              | 103,413  |   |      |   | 129,643  |  
|Goodwill                                                                                        |  |              | 289,278  |   |      |   | 289,278  |  
|Non-current deferred income taxes, net                                                          |  |              | 16,224   |   |      |   | 20,512   |  
|Other non-current assets                                                                        |  |              | 2,520    |   |      |   | 2,539    |  
|Restricted cash                                                                                 |  |              | 1,516    |   |      |   | 1,548    |  
|                                                                                                |  |              |          |   |      |   |          |  
|Total assets                                                                                    |  | $            | 596,462  |   |      | $ | 559,196  |  
|                                                                                                |  |              |          |   |      |   |          |  
|                                                                                                |  |             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                            |  |              |          |   |      |   |          |  
|Current liabilities:                                                                            |  |              |          |   |      |   |          |  
|Accounts payable                                                                                |  | $            | 1,003    |   |      | $ | 588      |  
|Funds due to merchants                                                                          |  |              | 14,378   |   |      |   | 12,162   |  
|Other accrued liabilities                                                                       |  |              | 20,694   |   |      |   | 18,272   |  
|Deferred revenue                                                                                |  |              | 5,630    |   |      |   | 4,519    |  
|Accrued restructuring                                                                           |  |              | 1,155    |   |      |   | 847      |  
|                                                                                                |  |              |          |   |      |   |          |  
|Total current liabilities                                                                       |  |              | 42,860   |   |      |   | 36,388   |  
|Deferred revenue, less current portion                                                          |  |              | 1,154    |   |      |   | 996      |  
|Other non-current liabilities                                                                   |  |              |         |   |      |   | 1,099    |  
|Accrued restructuring, less current portion                                                     |  |              | 927      |   |      |   | 832      |  
|Other non-current tax liabilities                                                               |  |              | 1,814    |   |      |   | 1,928    |  
|                                                                                                |  |              |          |   |      |   |          |  
|Total liabilities                                                                               |  |              | 46,755   |   |      |   | 41,243   |  
|                                                                                                |  |              |          |   |      |   |          |  
|                                                                                                |  |             
|Commitments and contingencies                                                                   |  |              |          |   |      |   |          |  
|                                                                                                |  |             
|Stockholders equity:                                                                           |  |              |          |   |      |   |          |  
|Common stock, $0.001 par value:                                                                 |  |              |          |   |      |   |          |  
|Authorized shares125,000,000                                                                   |  |              |          |   |      |   |          |  
|Issued and outstanding shares70,402,674 in 2009 and 68,935,857 in 2008                         |  |              | 70       |   |      |   | 69       |  
|Additional paid-in capital                                                                      |  |              | 816,972  |   |      |   | 796,912  |  
|Accumulated other comprehensive loss                                                            |  |              | (1,497   | ) |      |   | (2,225   | )
|Accumulated deficit                                                                             |  |              | (265,838 | ) |      |   | (276,803 | )
|                                                                                                |  |              |          |   |      |   |          |  
|Total stockholders equity                                                                      |  |              | 549,707  |   |      |   | 517,953  |  
|                                                                                                |  |              |          |   |      |   |          |  
|Total liabilities and stockholders equity                                                      |  | $            | 596,462  |   |      | $ | 559,196  |  
|                                                                                                |  |              |          |   |      |   |          |  

See accompanying notes.



34



---

##### Table of Contents

CYBERSOURCE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)



|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                 |  | Year Ended December 31, |        
|                                                                                 |  | 2009                    |         | 2008 |   |         | 2007 | 
|Revenues                                                                         |  | $                       | 265,136 |      | $ | 229,026 |      |  | $ | 116,999 |  
|Cost of revenues                                                                 |  |                         | 125,064 |      |   | 111,768 |      |  |   | 62,113  |  
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|Gross profit                                                                     |  |                         | 140,072 |      |   | 117,258 |      |  |   | 54,886  |  
|Operating expenses:                                                              |  |                         |         |      |   |         |      |  |   |         |  
|Product development                                                              |  |                         | 28,504  |      |   | 22,903  |      |  |   | 13,397  |  
|Sales and marketing                                                              |  |                         | 71,706  |      |   | 68,424  |      |  |   | 25,685  |  
|General and administrative                                                       |  |                         | 23,884  |      |   | 25,133  |      |  |   | 16,734  |  
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|Total operating expenses                                                         |  |                         | 124,094 |      |   | 116,460 |      |  |   | 55,816  |  
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|Income (loss) from operations                                                    |  |                         | 15,978  |      |   | 798     |      |  |   | (930    | )
|Other income, net                                                                |  |                         | 208     |      |   | 1,134   |      |  |   | 314     |  
|Interest income                                                                  |  |                         | 257     |      |   | 1,444   |      |  |   | 2,726   |  
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|Income before taxes                                                              |  |                         | 16,443  |      |   | 3,376   |      |  |   | 2,110   |  
|Income tax provision (benefit)                                                   |  |                         | 5,478   |      |   | (7,353  | )    |  |   | (319    | )
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|Net income                                                                       |  | $                       | 10,965  |      | $ | 10,729  |      |  | $ | 2,429   |  
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|Basic net income per share                                                       |  | $                       | 0.16    |      | $ | 0.16    |      |  | $ | 0.06    |  
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|Diluted net income per share                                                     |  | $                       | 0.15    |      | $ | 0.15    |      |  | $ | 0.06    |  
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|                                                                                 |  |                         |        
|Weighted average number of shares used in computing basic net income per share   |  |                         | 69,530  |      |   | 69,132  |      |  |   | 40,736  |  
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  
|                                                                                 |  |                         |        
|Weighted average number of shares used in computing diluted net income per share |  |                         | 71,945  |      |   | 71,789  |      |  |   | 43,225  |  
|                                                                                 |  |                         |         |      |   |         |      |  |   |         |  

See accompanying notes.



35



---

##### Table of Contents

CYBERSOURCE CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(In thousands, except share amounts)



|                                                             |  |              |   |  |                          |    |   |                                            |   |         |                    |  |   |        |   |  |   |          |   |  |   |         |  
|------------------------------------------------------------ |  | ------------ | - |  | ------------------------ | -- | - | ------------------------------------------ | - | ------- | ------------------ |  | - | ------ | - |  | - | -------- | - |  | - | ------- | -
|                                                             |  | Common Stock |   |  | AdditionalPaid-inCapital |    |   | AccumulatedOtherComprehensiveIncome (Loss) |   |         | AccumulatedDeficit |  |   | Total  |  
|                                                             |  | Shares       |   |  | Amount                   |    |   |                                            |   |        
|Balance at December 31, 2006                                 |  | 34,908,894   |   |  | $                        | 35 |   |                                            | $ | 368,606 |                    |  | $ | (52    | ) |  | $ | (289,961 | ) |  | $ | 78,628  |  
|Issuance of common stock under stock option plans            |  | 1,330,898    |   |  |                          | 1  |   |                                            |   | 6,843   |                    |  |   |       |   |  |   |         |   |  |   | 6,844   |  
|Issuance of common stock under employee stock purchase plan  |  | 7,345        |   |  |                          |   |   |                                            |   | 84      |                    |  |   |       |   |  |   |         |   |  |   | 84      |  
|Repurchase of common stock, net                              |  | (420,800     | ) |  |                          |   |   |                                            |   | (5,032  | )                  |  |   |       |   |  |   |         |   |  |   | (5,032  | )
|Issuance of common stock in the acquisition of Authorize.Net |  | 32,856,137   |   |  |                          | 33 |   |                                            |   | 412,933 |                    |  |   |       |   |  |   |         |   |  |   | 412,966 |  
|Tax benefit from employee stock options                      |  |             |   |  |                          |   |   |                                            |   | 287     |                    |  |   |       |   |  |   |         |   |  |   | 287     |  
|Stock-based compensation                                     |  |             |   |  |                          |   |   |                                            |   | 6,961   |                    |  |   |       |   |  |   |         |   |  |   | 6,961   |  
|Unrealized gain on short-term investments                    |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   | 27     |   |  |   |         |   |  |   | 27      |  
|Foreign currency translation adjustment                      |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   | 20     |   |  |   |         |   |  |   | 20      |  
|Net income                                                   |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   |       |   |  |   | 2,429    |   |  |   | 2,429   |  
|                                                             |  |              |   |  |                          |    |   |                                            |   |         |                    |  |   |        |   |  |   |          |   |  |   |         |  
|Comprehensive income                                         |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   |       |   |  |   |         |   |  |   | 2,476   |  
|                                                             |  |              |   |  |                          |    |   |                                            |   |         |                    |  |   |        |   |  |   |          |   |  |   |         |  
|Balance at December 31, 2007                                 |  | 68,682,474   |   |  |                          | 69 |   |                                            |   | 790,682 |                    |  |   | (5     | ) |  |   | (287,532 | ) |  |   | 503,214 |  
|Issuance of common stock under stock option plans            |  | 1,040,278    |   |  |                          | 1  |   |                                            |   | 7,049   |                    |  |   |       |   |  |   |         |   |  |   | 7,050   |  
|Issuance of common stock under employee stock purchase plan  |  | 6,811        |   |  |                          |   |   |                                            |   | 111     |                    |  |   |       |   |  |   |         |   |  |   | 111     |  
|Repurchase of common stock, net                              |  | (793,706     | ) |  |                          | (1 | ) |                                            |   | (10,702 | )                  |  |   |       |   |  |   |         |   |  |   | (10,703 | )
|Tax benefit from employee stock options                      |  |             |   |  |                          |   |   |                                            |   | 272     |                    |  |   |       |   |  |   |         |   |  |   | 272     |  
|Stock-based compensation                                     |  |             |   |  |                          |   |   |                                            |   | 9,500   |                    |  |   |       |   |  |   |         |   |  |   | 9,500   |  
|Foreign currency translation adjustment                      |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   | (2,220 | ) |  |   |         |   |  |   | (2,220  | )
|Net income                                                   |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   |       |   |  |   | 10,729   |   |  |   | 10,729  |  
|                                                             |  |              |   |  |                          |    |   |                                            |   |         |                    |  |   |        |   |  |   |          |   |  |   |         |  
|Comprehensive income                                         |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   |       |   |  |   |         |   |  |   | 8,509   |  
|                                                             |  |              |   |  |                          |    |   |                                            |   |         |                    |  |   |        |   |  |   |          |   |  |   |         |  
|Balance at December 31, 2008                                 |  | 68,935,857   |   |  |                          | 69 |   |                                            |   | 796,912 |                    |  |   | (2,225 | ) |  |   | (276,803 | ) |  |   | 517,953 |  
|Issuance of common stock under stock option plans            |  | 1,458,347    |   |  |                          | 1  |   |                                            |   | 11,857  |                    |  |   |       |   |  |   |         |   |  |   | 11,858  |  
|Issuance of common stock under employee stock purchase plan  |  | 8,470        |   |  |                          |   |   |                                            |   | 114     |                    |  |   |       |   |  |   |         |   |  |   | 114     |  
|Tax benefit from employee stock options                      |  |             |   |  |                          |   |   |                                            |   | 161     |                    |  |   |       |   |  |   |         |   |  |   | 161     |  
|Stock-based compensation                                     |  |             |   |  |                          |   |   |                                            |   | 7,928   |                    |  |   |       |   |  |   |         |   |  |   | 7,928   |  
|Foreign currency translation adjustment                      |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   | 728    |   |  |   |         |   |  |   | 728     |  
|Net income                                                   |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   |       |   |  |   | 10,965   |   |  |   | 10,965  |  
|                                                             |  |              |   |  |                          |    |   |                                            |   |         |                    |  |   |        |   |  |   |          |   |  |   |         |  
|Comprehensive income                                         |  |             |   |  |                          |   |   |                                            |   |        |                    |  |   |       |   |  |   |         |   |  |   | 11,693  |  
|                                                             |  |              |   |  |                          |    |   |                                            |   |         |                    |  |   |        |   |  |   |          |   |  |   |         |  
|Balance at December 31, 2009                                 |  | 70,402,674   |   |  | $                        | 70 |   |                                            | $ | 816,972 |                    |  | $ | (1,497 | ) |  | $ | (265,838 | ) |  | $ | 549,707 |  
|                                                             |  |              |   |  |                          |    |   |                                            |   |         |                    |  |   |        |   |  |   |          |   |  |   |         |  

See accompanying notes.



36



---

##### Table of Contents

CYBERSOURCE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                            |  | Year Ended December 31, |        
|                                                                                                            |  | 2009                    |         |   | 2008 |   |         | 2007 | 
|Operating activities:                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Net income                                                                                                  |  | $                       | 10,965  |   |      | $ | 10,729  |      |  | $ | 2,429   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                           |  |                         |         |   |      |   |         |      |  |   |         |  
|Depreciation expense                                                                                        |  |                         | 8,755   |   |      |   | 6,305   |      |  |   | 2,360   |  
|Amortization expense                                                                                        |  |                         | 26,230  |   |      |   | 28,673  |      |  |   | 4,218   |  
|Stock-based compensation                                                                                    |  |                         | 7,928   |   |      |   | 9,500   |      |  |   | 6,961   |  
|Income on investment in joint venture                                                                       |  |                         | (360    | ) |      |   | (263    | )    |  |   | (180    | )
|Deferred income taxes                                                                                       |  |                         | 3,153   |   |      |   | (9,778  | )    |  |   | (1,889  | )
|Write-off of intangible assets                                                                              |  |                         |        |   |      |   |        |      |  |   | 2,710   |  
|Restructuring related charges                                                                               |  |                         | 1,531   |   |      |   | 960     |      |  |   | 191     |  
|Loss on disposal of property and equipment                                                                  |  |                         |        |   |      |   | 18      |      |  |   | 8       |  
|Changes in assets and liabilities:                                                                          |  |                         |         |   |      |   |         |      |  |   |         |  
|Increase in accounts receivable                                                                             |  |                         | (4,627  | ) |      |   | (2,748  | )    |  |   | (1,747  | )
|Increase in prepaid expenses and other current assets                                                       |  |                         | (2,487  | ) |      |   | (1,121  | )    |  |   | (5,411  | )
|(Increase) decrease in other non-current assets                                                             |  |                         | 411     |   |      |   | 2,211   |      |  |   | (1,336  | )
|Increase (decrease) in accounts payable                                                                     |  |                         | 415     |   |      |   | (25     | )    |  |   | (411    | )
|Increase in other accrued liabilities                                                                       |  |                         | 195     |   |      |   | 4,029   |      |  |   | 4,247   |  
|Increase in funds due to merchants                                                                          |  |                         | 2,216   |   |      |   | 763     |      |  |   | 393     |  
|Increase (decrease) in non-current tax liabilities                                                          |  |                         | (114    | ) |      |   | (267    | )    |  |   | 23      |  
|Increase in deferred revenue                                                                                |  |                         | 1,269   |   |      |   | 1,250   |      |  |   | 962     |  
|                                                                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|Net cash provided by operating activities                                                                   |  |                         | 55,480  |   |      |   | 50,236  |      |  |   | 13,528  |  
|                                                                                                            |  |                         |        
|Investing activities:                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Purchases of property and equipment                                                                         |  |                         | (13,589 | ) |      |   | (11,847 | )    |  |   | (4,574  | )
|Cash used in the acquisition of Authorize.Net                                                               |  |                         |        |   |      |   |        |      |  |   | (25,734 | )
|Purchases of short-term investments                                                                         |  |                         |        |   |      |   |        |      |  |   | (61,964 | )
|Maturities of short-term investments                                                                        |  |                         |        |   |      |   |        |      |  |   | 95,233  |  
|                                                                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) investing activities                                                         |  |                         | (13,589 | ) |      |   | (11,847 | )    |  |   | 2,961   |  
|                                                                                                            |  |                         |        
|Financing activities:                                                                                       |  |                         |         |   |      |   |         |      |  |   |         |  
|Proceeds from exercise of stock options and issuance of common stock under the employee stock purchase plan |  |                         | 11,972  |   |      |   | 7,161   |      |  |   | 6,928   |  
|Repurchase of common stock, net                                                                             |  |                         |        |   |      |   | (10,703 | )    |  |   | (5,032  | )
|Tax benefit from employee stock options                                                                     |  |                         | 161     |   |      |   | 272     |      |  |   | 287     |  
|                                                                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) financing activities                                                         |  |                         | 12,133  |   |      |   | (3,270  | )    |  |   | 2,183   |  
|                                                                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|Effect of foreign exchange rate changes on cash                                                             |  |                         | 728     |   |      |   | (2,220  | )    |  |   | 20      |  
|                                                                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|Net increase in cash and cash equivalents                                                                   |  |                         | 54,752  |   |      |   | 32,899  |      |  |   | 18,692  |  
|Cash and cash equivalents at beginning of period                                                            |  |                         | 73,292  |   |      |   | 40,393  |      |  |   | 21,701  |  
|                                                                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                                                  |  | $                       | 128,044 |   |      | $ | 73,292  |      |  | $ | 40,393  |  
|                                                                                                            |  |                         |         |   |      |   |         |      |  |   |         |  
|                                                                                                            |  |                         |        
|Supplemental disclosure of noncash investing activity:                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Common stock issued in the acquisition of Authorize.Net                                                     |  | $                       |        |   |      | $ |        |      |  | $ | 412,966 |  
|Supplemental disclosure of cash flow information:                                                           |  |                         |         |   |      |   |         |      |  |   |         |  
|Income taxes paid                                                                                           |  | $                       | 2,216   |   |      | $ | 768     |      |  | $ | 17      |  

See accompanying
notes.



37



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|1. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

The Company

CyberSource Corporation (CyberSource or the Company) provides electronic
payment and risk management solutions. CyberSource solutions enable electronic payment processing for Web, call center, and point-of-sale environments. The Company partners with and connects to a large network of payment processors and other payment
service providers to offer merchants a single source solution that simplifies electronic payment management. CyberSources payment solutions allow eCommerce merchants to accept a wide range of online payment options, from credit cards and
electronic checks, to global payment options and emerging payment types. The Company also offers industry leading risk management solutions to help online merchants address complexities such as credit card fraud, online tax requirements, and export
controls. The Companys professional services help to design, integrate, and optimize commerce transaction processing systems for merchants.

Basis of Presentation

The accompanying consolidated financial statements reflect the financial position and
results of operations of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

In order to conform to the current period presentation, certain reclassifications have been made to prior year balances. Such reclassifications do not have a material impact on the Companys
consolidated balance sheets, statements of income, or statements of cash flows.

In June 2009, the Financial Accounting
Standards Board (FASB) established the Accounting Standards Codification (ASC) as the source of authoritative GAAP recognized by the FASB. The ASC supersedes all existing U.S. accounting standards; all other accounting
literature not included in the ASC (other than Securities and Exchange Commission guidance for publicly-traded companies) is considered non-authoritative. The ASC was effective for interim and annual reporting periods ending after September 15,
2009. The adoption of the ASC changed the Companys references to U.S. GAAP but did not have a material impact on the Companys consolidated financial statements.

Foreign Currency Translation

The financial statements of the
Companys non-U.S. subsidiaries are translated into U.S. Dollars in accordance with ASC Topic 830, Foreign Currency Matters. Assets and liabilities of the Companys subsidiaries are translated at the rates of exchange at the
end of the period. Revenues and expenses are translated using the average exchange rates in effect during the period. Foreign currency translation adjustments are recorded in other comprehensive income (loss). Gains and losses realized from foreign
currency transactions denominated in currencies other than the subsidiarys functional currency were approximately $0.4 million in losses, $0.8 million in gains and $0.1 million in gains for the years ended December 31, 2009, 2008 and
2007, respectively.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company derives its revenues primarily from monthly commerce transaction processing fees and global acquiring fees, support service fees and setup fees. The Company recognizes revenue in accordance with ASC Topic 605, Revenue
Recognition (ASC 605). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the
fee is fixed or determinable; and (4) collectibility is reasonably assured. Determination of criteria (4) is based on managements judgments regarding the collectibility of those fees.



38



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Transaction revenues are recognized in the period in which the transactions occur. The
Company derives a significant portion of its transaction processing revenues from global acquiring fees charged to merchants for payment processing services. The Companys fees, which are primarily a percentage of the dollar amount of each
transaction processed, are based upon the merchants monthly charge volume and risk profile. In addition, the Company records revenues for miscellaneous services related to global acquiring, such as fees for processing credit card chargebacks.
In accordance with ASC Subtopic 605-45, Principal Agent Consideration, the Company recognizes these fees on a gross basis as it is the primary agent in the transaction in the period the merchants transactions are processed. Related
interchange fees paid to card issuing banks and assessments paid to credit card associations are recognized in cost of revenues at that time.

Provisions are provided for sales returns and are based on historical experience and other known factors. For the years ended December 31, 2009, 2008 and 2007, no customer accounted for more than 10%
of total revenues.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available that is evaluated by the chief operating decision maker or decision-making
group to make decisions about how to allocate resources and assess performance. The Companys chief operating decision maker is the Chief Executive Officer (CEO). As of December 31, 2009, the Company views its operations as one
segment, commerce transaction services, and supports and manages the business based on the revenues of this segment.

Cash and Cash
Equivalents

The Company considers all highly liquid investments with an original maturity from the date of purchase of
three months or less to be cash equivalents. As of December 31, 2009 and 2008, cash equivalents consist of investments in money market funds.

Concentration of Credit Risk

Financial instruments that potentially subject the Company and its subsidiaries
to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable.

Cash and cash
equivalents are invested in major financial institutions in the United States. Such deposits may be in excess of insured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the
Companys investments are financially sound and, accordingly, relatively minimal credit risk exists with respect to these investments.

The accounts receivable of the Company and its subsidiaries are derived from sales to customers located primarily in the United States and Europe. The Company performs ongoing credit evaluations of its
customers. The Company generally does not require collateral.

An allowance for doubtful accounts is determined with respect
to those amounts that the Company has determined to be doubtful of collection. At December 31, 2009 and 2008, no customer accounted for 10% or more of the Companys accounts receivable balance. At December 31, 2009 and 2008, the
percentage of accounts receivable due from foreign customers was 17% of total accounts receivable balance.

The Company has no
off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements.

The credit card associations require a bank sponsor that ultimately assumes chargeback or merchant fraud losses if the Company was financially unable to assume such losses. The Company currently has an agreement with a bank sponsor that
renews automatically in March of each year and requires at least 180 days written notice prior to the expiration of any annual term if either party wishes to exercise its right not to renew the agreement. As of the date of this report, the Company
has not received any notice of non-renewal from its bank sponsor.



39



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Property and Equipment

Property and equipment are stated at cost and are depreciated on a straight-line basis over estimated useful lives of three to five years.
Leasehold improvements are amortized on a straight-line basis over the shorter of the lease terms or the estimated useful lives. Depreciation expense was approximately $8.8 million, $6.3 million and $2.4 million for the years ended December 31,
2009, 2008 and 2007, respectively.

Product Development

Product development expenditures are charged to operations as incurred. ASC Subtopic 985-20, Costs of Software to be Sold, Leased or Marketed, requires capitalization of certain software
development costs subsequent to the establishment of technological feasibility. Based on the Companys product development process, technological feasibility is established upon the completion of a working model. To date, costs incurred by the
Company between the completion of the working model and the point at which the product is ready for general release have been insignificant. Accordingly, the Company has charged all such costs to product development expense in the period incurred.

Internal Use Software

The company follows the guidance set forth in ASC Subtopic 350-40, Internal-Use Software (ASC 350-40), in accounting for the development of its on demand use systems. ASC 350-40
requires companies to capitalize qualifying computer software costs which are incurred during the application development stage, and to amortize them over the softwares estimated useful life. The Company amortizes such costs when the systems
become operational. Prior to 2008, the Company acquired approximately $0.8 million of internal use software, of which approximately $0.1 million of this software was operational prior to the acquisition and approximately $0.7 million of this
software was placed in service in 2008.

Advertising Expense

The cost of advertising is recorded as an expense when incurred. Advertising costs were approximately $38,000, $73,000 and $31,000 during
the years ended December 31, 2009, 2008 and 2007, respectively.

Accounting for Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation  Stock Compensation.
Total stock-based compensation expense recognized in the consolidated statement of operations for the years ended December 31, 2009, 2008 and 2007 was approximately $7.9 million, $9.5 million and $7.0 million, respectively, before income taxes.
They were included in the consolidated statements of income as follows (in thousands):



|                           |  |                         |       |      |   |       |  |   |      
|-------------------------- |  | ----------------------- | ----- | ---- | - | ----- |  | - | -----
|                           |  | Year Ended December 31,
|                           |  | 2009                    |       | 2008 |   | 2007 
|Cost of revenues           |  | $                       | 1,840 |      | $ | 1,562 |  | $ | 872  
|Product development        |  |                         | 2,206 |      |   | 2,087 |  |   | 1,373
|Sales and marketing        |  |                         | 2,084 |      |   | 1,819 |  |   | 1,380
|General and administrative |  |                         | 1,798 |      |   | 4,032 |  |   | 3,336
|                           |  |                         |       |      |   |       |  |   |      
|                           |  | $                       | 7,928 |      | $ | 9,500 |  | $ | 6,961
|                           |  |                         |       |      |   |       |  |   |      

Long-Lived Assets

ASC Topic 350, IntangiblesGoodwill and Other (ASC 350) requires that the Company perform tests for impairment
of its goodwill annually and between annual tests in certain circumstances. As of December 31, 2009, the Company had recorded goodwill in connection with its acquisition of Authorize.Net in November 2007, with a carrying value of approximately
$289.3 million. Significant judgments are required to evaluate goodwill for impairment including the determination of reporting units, estimating future cash flows, determining appropriate discount rates and other assumptions. The Company evaluates
the goodwill related to the Authorize.Net acquisition on an annual basis as of July 31 or when indicators of impairment may exist. The Company did not record any goodwill or intangible asset impairment charges during 2009.



40



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



ASC Section 360-10-35, Impairment or Disposal of Long-Lived Assets
(ASC 360-10-35) requires that the Company perform tests for impairment of its intangible assets subject to amortization annually and more frequently whenever events or circumstances suggest that its intangible assets may be impaired. The
Company evaluates the intangible assets related to the Authorize.Net acquisition on an annual basis as of July 31 or when indicators of impairment may exist. As of December 31, 2009, the Company had recorded intangible assets in connection
with its acquisition of Authorize.Net with a carrying value of approximately $103.4 million.

To evaluate potential
impairment, ASC 350 and ASC 360-10-35 require the Company to assess whether the estimated fair value of its goodwill and intangible assets are greater than their respective carrying value at the time of the test. Accordingly, there could be
significant judgment in determining the fair values attributable to goodwill and intangible assets, including the determination of reporting units, estimating future cash flows, determining appropriate discount rates and other assumptions.

Net Income Per Share

In accordance with ASC Topic 260, Earnings Per Share, basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net
income per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise
of stock options, restricted shares and unvested common shares subject to repurchase or cancellation.

Income Taxes

Income taxes are calculated under the provisions of ASC Topic 740, Income Taxes (ASC 740). Under ASC 740, the
liability method is used in accounting for income taxes, which includes the effects of temporary differences between financial and taxable amounts of assets and liabilities as well as the effects of net operating loss and credit carryforwards to
determine deferred tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to more likely than not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statement. Although the
Company believes it has adequately reserved for its uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. To the extent that the final tax outcome of these matters is different than the
amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made.

Accumulated Other Comprehensive Loss

The Companys comprehensive income consists of its net income and
other comprehensive income (loss), including unrealized gains or losses on available for sale securities and foreign currency translation gains or losses. At December 31, 2009 and 2008, accumulated other comprehensive loss consisted only of
foreign currency translation adjustments.

New Accounting Pronouncements

In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities (ASU 2009-17). The amendments in this update are the result of Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation
No. 46(R), which was issued in June 2009. ASU 2009-17 amends the consolidation guidance for variable-interest entities under ASC Subtopic 810-10. The amendments include: (1) the elimination of the exemption for qualifying special
purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. ASU 2009-17 will be effective
for the Company as of January 1, 2010 and for interim and annual reporting periods thereafter. Earlier application is prohibited. The adoption of ASU 2009-17 is not expected to have a significant impact on the Companys consolidated
financial statements.



41



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue
Recognition (Topic 605) (ASU 2009-13) which addresses arrangements with multiple-deliverable revenue arrangements under ASC Subtopic 605-25. It provides guidance on whether multiple deliverables exist, how the arrangement should be
separated, and the consideration allocated. It (1) requires an entity to allocate revenue in an arrangement using estimated selling price of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of
selling price and (2) eliminates the use of the residual method and requires an entity to allocate revenue using the relative selling price method. The Company will apply ASU 2009-13 on a prospective basis for revenue arrangements entered into
or materially modified beginning on or after January 1, 2011. Earlier application is permitted. The Company has not yet determined the effect on the Companys consolidated financial statements, if any, upon the adoption of ASU 2009-13.



|2. | Intangible Assets, Net and Goodwill
|-- | -----------------------------------

Intangible assets, net

Intangible assets, net consist of the following (in thousands) as of December 31,
2009:



|                                             |  |                                       |  |       |         |                         |   |        |  |   |        
|-------------------------------------------- |  | ------------------------------------- |  | ----- | ------- | ----------------------- | - | ------ |  | - | -------
|                                             |  | Weighted-AverageUseful Life(in years) |  | Gross |         | AccumulatedAmortization |   | Net   
|Partner contracts and related relationships  |  | 11                                    |  | $     | 86,100  |                         | $ | 8,715  |  | $ | 77,385 
|Merchant contracts and related relationships |  | 4                                     |  |       | 49,300  |                         |   | 34,078 |  |   | 15,222 
|Existing technology                          |  | 5                                     |  |       | 21,900  |                         |   | 11,774 |  |   | 10,126 
|Trade name                                   |  | 2                                     |  |       | 3,900   |                         |   | 3,900  |  |   |       
|Processor relationships                      |  | 5                                     |  |       | 1,200   |                         |   | 520    |  |   | 680    
|                                             |  |                                       |  |       |         |                         |   |        |  |   |        
|Total                                        |  |                                       |  | $     | 162,400 |                         | $ | 58,987 |  | $ | 103,413
|                                             |  |                                       |  |       |         |                         |   |        |  |   |        

On November 1, 2007, the Company completed the
acquisition of Authorize.Net Holdings, Inc., a provider of products and services primarily for businesses that sell products and services online. Partner contracts and related relationships represent Authorize.Nets network of independent sales
organizations and resellers. Merchant contracts and related relationships represent Authorize.Nets underlying merchant agreements and relationships with their installed customer base. Existing technology represents Authorize.Nets payment
gateway platform. Trade name represents Authorize.Nets brand and trademarks. Processor relationships represent Authorize.Nets electronic connectivity with various processing networks which allow their gateway to process transactions for
their merchants.

The value of the partner contracts and related relationships as well as the merchant contracts and related
relationships were derived by considering, among other factors, the expected income and discounted cash flows to be generated from such contracts and relationships. The value of the existing technology was derived by considering, among other
factors, the expected income and discounted cash flows to be generated, taking into account risks related to the characteristics and applications of the technology and assessments of the life cycle state of the technology. The value of the trade
name was derived by considering, among other factors, expected income and discounted cash flows to be generated, also taking into account the expected period in which the Company intends to utilize the trade name. The value of the processor
relationships was derived by considering the expected cost that would be incurred to establish and build connections with the processors.

Intangible assets are being amortized over their respective estimated useful lives and have a total weighted average amortization period of approximately 8 years.



42



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The components of acquired intangible assets as of December 31, 2008 were as
follows (in thousands):



|                                             |  |       |         |                         |   |        |  |   |        
|-------------------------------------------- |  | ----- | ------- | ----------------------- | - | ------ |  | - | -------
|                                             |  | Gross |         | AccumulatedAmortization |   | Net   
|Partner contracts and related relationships  |  | $     | 86,100  |                         | $ | 2,678  |  | $ | 83,422 
|Merchant contracts and related relationships |  |       | 49,300  |                         |   | 20,968 |  |   | 28,332 
|Existing technology                          |  |       | 21,900  |                         |   | 6,586  |  |   | 15,314 
|Trade name                                   |  |       | 3,900   |                         |   | 2,245  |  |   | 1,655  
|Processor relationships                      |  |       | 1,200   |                         |   | 280    |  |   | 920    
|                                             |  |       |         |                         |   |        |  |   |        
|Total                                        |  | $     | 162,400 |                         | $ | 32,757 |  | $ | 129,643
|                                             |  |       |         |                         |   |        |  |   |        

The amortization expense related to the Authorize.Net
intangible assets for the years ended December 31, 2009, 2008 and 2007 was approximately $26.2 million, $28.7 million and $4.1 million, respectively.

Estimated future amortization expense for the intangible assets recorded on the Companys December 31, 2009 balance sheet is as follows (in thousands):



|           |  |        |        
|---------- |  | ------ | -------
|           |  | Amount
|2010       |  | $      | 21,777 
|2011       |  |        | 18,743 
|2012       |  |        | 12,903 
|2013       |  |        | 10,038 
|2014       |  |        | 10,234 
|Thereafter |  |        | 29,718 
|           |  |        |        
|Total      |  | $      | 103,413
|           |  |        |        

Goodwill

As of January 1, 2008, the Company had recorded goodwill in connection with its acquisition of Authorize.Net in November 2007 with a
carrying value of approximately $291.5 million. During 2008 the carrying amount of goodwill was adjusted by approximately $0.1 million to reflect the reversal of certain liabilities accrued prior to the close of the Authorize.Net acquisition and by
approximately $2.1 million to release certain tax accruals related to Authorize.Net which were assumed as part of the acquisition. As of December 31, 2008, the carrying amount of goodwill was $289.3 million. There were no adjustments to
goodwill during the year ended December 31, 2009.



|3. | Restructuring Charges
|-- | ---------------------

In March 2006, the Company acquired BidPay.com, Inc. (BidPay), a payment service provider for online auctions. In December of 2007, the Company announced the closure of BidPay. As a result, the Company recorded a restructuring
charge of approximately $1.8 million in the fourth quarter of 2007. This charge was reported in general and administrative expenses and included $1.6 million for the write-off of the remaining intangible assets related to BidPay, net of deferred tax
liabilities, and $0.1 million for the write-off of property and equipment.

As a result of the Companys acquisition of
Authorize.Net, the Company acquired certain restructuring accruals related to certain facilities that Authorize.Net had exited. During 2009 and 2008, the Company updated its assumptions associated with its excess office space in Burlington,
Massachusetts and American Fork, Utah. As a result, the Company recorded restructuring charges totaling approximately $1.5 million and $1.0 million in 2009 and 2008, respectively. The expense was included in general and administrative expenses.



43



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table summarizes the activity in the restructuring accrual during 2009 (in
thousands):



|                           |  |                            |       |                                 |   |              |  |   |                            |   |  |   |      
|-------------------------- |  | -------------------------- | ----- | ------------------------------- | - | ------------ |  | - | -------------------------- | - |  | - | -----
|                           |  | Balance atDecember 31,2008 |       | AdjustmenttoRestructuringCharge |   | CashPayments |  |   | Balance atDecember 31,2009
|Facilities related charges |  | $                          | 1,679 |                                 | $ | 1,531        |  | $ | (1,128                     | ) |  | $ | 2,082

The Company has lease
obligations related to its exited facilities which extend through the year 2012.



|4. | Fair Value Measurements
|-- | -----------------------

Effective January 1, 2008, the Company adopted ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value under generally
accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize
the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the
following:



| |  |  | 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 are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 financial assets measured at fair value on a recurring basis consisted of cash
accounts of approximately $64.6 million and $26.5 million as of December 31, 2009 and 2008, respectively, and money market funds (cash equivalents) of approximately $63.4 million and $46.8 million as of December 31, 2009 and 2008,
respectively. The Company had no Level 2 or Level 3 financial assets at December 31, 2009 and 2008. The Company had no unrealized gains or losses from investments as of December 31, 2009 and 2008.



|5. | Balance Sheet Detail
|-- | --------------------

Property and equipment consist of the following (in thousands):



|                                               |  |              |        |      |   |       
|---------------------------------------------- |  | ------------ | ------ | ---- | - | ------
|                                               |  | December 31,
|                                               |  | 2009         |        | 2008
|Computer equipment and software                |  | $            | 52,804 |      | $ | 42,721
|Furniture and fixtures                         |  |              | 3,560  |      |   | 3,245 
|Office equipment                               |  |              | 1,239  |      |   | 1,124 
|Leasehold improvements                         |  |              | 3,949  |      |   | 3,821 
|Internally developed software                  |  |              | 977    |      |   | 977   
|                                               |  |              |        |      |   |       
|                                               |  |              | 62,529 |      |   | 51,888
|Less accumulated depreciation and amortization |  |              | 41,507 |      |   | 35,700
|                                               |  |              |        |      |   |       
|                                               |  | $            | 21,022 |      | $ | 16,188
|                                               |  |              |        |      |   |       



44



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Prepaid expenses and other current assets consist of the following (in thousands):



|                                                |  |              |       |      |   |      
|----------------------------------------------- |  | ------------ | ----- | ---- | - | -----
|                                                |  | December 31,
|                                                |  | 2009         |       | 2008
|Prepaid expenses                                |  | $            | 4,360 |      | $ | 2,970
|Other current assets                            |  |              | 3,437 |      |   | 2,340
|                                                |  |              |       |      |   |      
|Total prepaid expenses and other current assets |  | $            | 7,797 |      | $ | 5,310
|                                                |  |              |       |      |   |      

Other accrued liabilities consist of the following (in thousands):



|                                       |  |              |        |      |   |       
|-------------------------------------- |  | ------------ | ------ | ---- | - | ------
|                                       |  | December 31,
|                                       |  | 2009         |        | 2008
|Employee benefits and related expenses |  | $            | 8,800  |      | $ | 7,937 
|Accrued cost of revenues               |  |              | 2,184  |      |   | 2,753 
|Accrued reseller residual payments     |  |              | 3,233  |      |   | 2,978 
|Other liabilities                      |  |              | 6,477  |      |   | 4,604 
|                                       |  |              |        |      |   |       
|Total other accrued liabilities        |  | $            | 20,694 |      | $ | 18,272
|                                       |  |              |        |      |   |       

Accrued reseller residual payments represent
commissions due to third party sales agents that have sold the Companys transaction services.



|6. | Investment in Joint Venture
|-- | ---------------------------

On March 1, 2000, the Company entered into a joint venture agreement with Japanese partners Marubeni Corporation and Trans-Cosmos, Inc. to establish CyberSource K.K. to provide commerce transaction services to the Japanese market. The
Company will maintain a majority controlling interest in CyberSource K.K., subject to certain veto rights granted to the partners, which will expire when CyberSource K.K. achieves at least $2.0 million in quarterly revenue. The joint venture is
being accounted for under the equity method of accounting until the veto rights granted to the partners as described above expire. After such date, in accordance with the joint venture agreement, the Company will consolidate the financial position
and results of operations of CyberSource K.K. In 2009, 2008 and 2007, the Company recognized joint venture income of approximately $0.4 million, $0.3 million and $0.2 million, respectively.



|7. | Funds Due to Merchants
|-- | ----------------------

At December 31, 2009, the Company was holding funds in the amount of $14.4 million due to merchants. The funds are included in cash and cash equivalents and funds due to merchants on the Companys consolidated balance sheet. The
Company typically holds certain funds related to certain electronic check transactions based on the contractual terms with the merchant, generally seven business days. The Company also holds certain funds related to certain credit card and automated
clearing house transactions based on the contractual terms with the financial institution which processes the transactions, generally two to four business days. The Companys agreements with its customers do not contain any terms or conditions
that legally restrict the use of cash amounts classified on the balance sheet as funds due to merchants.



|8. | Commitments
|-- | -----------

The Company
leases its primary facility under noncancelable operating leases. The lease agreement for the Companys primary facility expires in December 2011. Rental expense was approximately $3.1 million, $3.1 million and $2.2 million for the years ended
December 31, 2009, 2008 and 2007, respectively.



45



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Future minimum lease payments under noncancelable operating leases at December 31,
2009 are as follows (in thousands):



|                         |  |                 |       
|------------------------ |  | --------------- | ------
|Year ending December 31, |  | OperatingLeases
|2010                     |  | $               | 5,240 
|2011                     |  |                 | 4,880 
|2012                     |  |                 | 2,118 
|2013                     |  |                 | 404   
|                         |  |                 |       
|Total minimum payments   |  | $               | 12,642
|                         |  |                 |       

The total of minimum rentals to be received in the
future under noncancelable subleases is approximately $2.0 million.



|9. | Restricted Cash
|-- | ---------------

At
December 31, 2009, the Company had an unsecured letter of credit in the amount of $1.0 million per the terms of the operating lease related to the Burlington, Massachusetts office facility it acquired through the acquisition of Authorize.Net.
The Company also has $1.0 million on deposit with the financial institution that issued the letter of credit to the Company. This amount is classified as restricted cash in the Companys balance sheet.

In addition, the Company has $0.5 million on deposit with a financial institution to cover any deficit account balance that could occur if
the amount of transactions returned or charged back exceeds the balance on deposit with the financial institution. This amount is classified as restricted cash in the Companys balance sheet. To date, the deposit has not been applied to offset
any deficit balance. The deposit will be held continuously for as long as the Company utilizes certain processing services of the financial institution, and the amount of the deposit may increase as processing volume increases.



|10. | Stockholders Equity
|--- | --------------------

Stock
Options

In March 1998, the Company adopted its 1998 Stock Option Plan (the 1998 Option Plan). There are
1,900,000 shares of common stock authorized for issuance under the 1998 Option Plan. The 1998 Option Plan provides for the issuance of common stock and the granting of options to employees, officers, directors, consultants, independent contractors,
and advisors of the Company. The exercise price of a nonqualifying stock option and an incentive stock option shall not be less than 85% and 100%, respectively, of the fair value of the underlying shares on the date of grant. Options granted under
the 1998 Option Plan generally become exercisable over four years at the rate of 25% per year from the grant date. In March 2008, the 1998 Option Plan expired and the Company was prohibited from issuing new option grants under the 1998 Option
Plan. There were no options under the 1998 Option Plan outstanding as of December 31, 2009.

In January 1999, the Company
adopted its 1999 Stock Option Plan (the 1999 Option Plan). The Company has reserved a total of 15,500,000 shares of common stock for issuance under the 1999 Option Plan. The provisions of the 1999 Option Plan are similar to those of the
1998 Option Plan. In May 2009, The Company increased the number of shares reserved under the 1999 Option Plan to 19,100,000 shares.

In October 1999, the Company adopted the 1999 Nonqualified Stock Option Plan (the 1999 Nonqualified Option Plan). The Company has reserved a total of 2,487,500 shares of common stock for issuance under the 1999 Nonqualified
Option Plan. The 1999 Nonqualified Option Plan provides for the granting of non-qualified stock options to employees, consultants and directors. The other provisions of the 1999 Nonqualified Option Plan are similar to those of the 1999 and 1998
Stock Option Plans. In October 2009, the 1999 Nonqualified Option Plan expired and the Company was prohibited from issuing new option grants under the 1999 Nonqualified Option Plan. There were approximately 980,000 options under the 1999
Nonqualified Option Plan outstanding as of December 31, 2009.

In September 2000, the Company assumed the PaylinX Stock
Option Plan as a result of its acquisition of PaylinX Corporation in September 2000. During 2004, the Company retired the unissued shares available for grant. Options previously



46



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



granted under this plan that have not yet expired or otherwise become unexercisable continue to be administered under such plan, and any portions that expire or become unexercisable for any
reason shall be canceled and be unavailable for future issuance.

Stock options to purchase the Companys common stock
are granted at prices equal to the fair market value on the date of grant. Options generally vest monthly over a four year period beginning from the date of grant and generally expire six to ten years from the date of grant. Options granted to
non-employee directors generally become vested nine months from the date of grant. Nearly all outstanding stock options are non-qualified stock options. As of December 31, 2009, 24.7 million shares are authorized for issuance under the
Companys stock option plans.

A summary of the Companys stock option activity is presented in the following table:



|                                                    |  |            |   |  |                                        |       |                                          |      |                         |   |           
|--------------------------------------------------- |  | ---------- | - |  | -------------------------------------- | ----- | ---------------------------------------- | ---- | ----------------------- | - | ----------
|                                                    |  | Shares     |   |  | Weightedaverageexercise priceper share |       | Weightedaverageremainingcontractual life |      | Aggregateintrinsicvalue
|Outstanding as of December 31, 2008                 |  | 8,825,496  |   |  | $                                      | 9.82  |                                          |      |                         |   |           
|Granted                                             |  | 1,912,000  |   |  | $                                      | 12.61 |                                          |      |                         |   |           
|Exercised                                           |  | (1,458,347 | ) |  | $                                      | 8.13  |                                          |      |                         |   |           
|Forfeited                                           |  | (851,842   | ) |  | $                                      | 12.24 |                                          |      |                         |   |           
|                                                    |  |            |   |  |                                        |       |                                          |      |                         |   |           
|Outstanding as of December 31, 2009                 |  | 8,427,307  |   |  | $                                      | 10.50 |                                          | 3.98 |                         | $ | 83,424,544
|                                                    |  |            |   |  |                                        |       |                                          |      |                         |   |           
|Vested and expected to vest as of December 31, 2009 |  | 8,196,502  |   |  | $                                      | 10.44 |                                          | 3.95 |                         | $ | 81,769,543
|Exercisable as of December 31, 2009                 |  | 5,366,039  |   |  | $                                      | 9.21  |                                          | 3.61 |                         | $ | 60,977,213
|Exercisable as of December 31, 2008                 |  | 5,222,322  |   |  | $                                      | 8.37  |                                          |      |                         |   |           
|Exercisable as of December 31, 2007                 |  | 4,703,979  |   |  | $                                      | 7.42  |                                          |      |                         |   |           

The following table summarizes information about options outstanding at December 31, 2009:



|                |  |                             |  |                               |       |                                                  |      |                             |           |                               |   |      
|--------------- |  | --------------------------- |  | ----------------------------- | ----- | ------------------------------------------------ | ---- | --------------------------- | --------- | ----------------------------- | - | -----
|Exercise Price  |  | Number ofOptionsOutstanding |  | WeightedAverageExercise Price |       | Weighted AverageRemainingContractual Life(Years) |      | Number ofOptionsExercisable |           | WeightedAverageExercise Price
|$  0.83$  5.46 |  | 1,740,824                   |  | $                             | 3.87  |                                                  | 3.76 |                             | 1,740,774 |                               | $ | 3.87 
|$  5.63$10.04  |  | 1,747,099                   |  | $                             | 7.95  |                                                  | 2.99 |                             | 1,567,946 |                               | $ | 7.80 
|$10.06$12.33   |  | 2,586,213                   |  | $                             | 12.15 |                                                  | 4.70 |                             | 977,727   |                               | $ | 11.98
|$12.34$15.60   |  | 1,724,887                   |  | $                             | 13.07 |                                                  | 4.27 |                             | 726,594   |                               | $ | 13.14
|$15.63$51.75   |  | 628,284                     |  | $                             | 22.18 |                                                  | 3.52 |                             | 352,998   |                               | $ | 25.96
|                |  |                             |  |                               |       |                                                  |      |                             |           |                               |   |      
|                |  | 8,427,307                   |  | $                             | 10.50 |                                                  |      |                             | 5,366,039 |                               | $ | 9.21 
|                |  |                             |  |                               |       |                                                  |      |                             |           |                               |   |      

For stock options granted, the Company determined the fair value at the date of grant or purchase
using the Black-Scholes option valuation model and the following weighted average assumptions:



|                        |  |                         |  |               |  |              
|----------------------- |  | ----------------------- |  | ------------- |  | -------------
|                        |  | Year Ended December 31,
|                        |  | 2009                    |  | 2008          |  | 2007         
|Risk-free interest rate |  | 1.43% - 1.72%           |  | 1.86% - 3.18% |  | 4.34% - 4.74%
|Dividend yield          |  |                        |  |              |  |             
|Volatility              |  | 58% - 60%               |  | 49% - 56%     |  | 51% - 58%    
|Expected life (years)   |  | 3.58                    |  | 3.54          |  | 3.46         

The expected life of
the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. Expected stock
price volatility is based on historical volatility of the Companys stock over the expected life of the options. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues with an equivalent remaining
expected



47



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



life. The Company has not paid dividends in the past and does not plan to pay any dividends in the near future. The weighted average fair value of options granted was $5.47, $5.12 and $5.81 per
share for options granted during 2009, 2008 and 2007, respectively.

The fair value of each stock option granted is estimated
on the date of grant using the Black-Scholes option valuation model. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and the Companys experience. Options
granted are valued using the single option valuation approach, and the resulting expense is recognized on a straight-line basis over the vesting period of the option. Compensation expense is recognized only for those options expected to vest, with
forfeitures estimated at the date of grant based on the Companys historical experience and future expectations.

As of
December 31, 2009, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $16.4 million, which is expected to be recognized over a weighted average period of approximately 2.54 years.
During 2009, 2008 and 2007, the total intrinsic value of stock options exercised was approximately $11.7 million, $11.2 million and $11.8 million, respectively. During 2009, the total cash received from the exercise of stock options was
approximately $12.0 million.

Restricted Stock Awards

The following table summarizes information about restricted stock awards at December 31, 2009:



|                                    |  |                 |   |  |                                      |      
|----------------------------------- |  | --------------- | - |  | ------------------------------------ | -----
|                                    |  | Nonvestedshares |   |  | Weighted averagegrant date fairvalue
|Outstanding as of December 31, 2008 |  | 100,000         |   |  | $                                    | 10.46
|Awarded                             |  |                |   |  | $                                    |     
|Vested                              |  | (75,000         | ) |  | $                                    | 10.46
|Forfeited                           |  | (25,000         | ) |  | $                                    | 10.46
|                                    |  |                 |   |  |                                      |      
|Outstanding as of December 31, 2009 |  |                |   |  | $                                    |     
|                                    |  |                 |   |  |                                      |      

The total fair value of shares vested during the year ended December 31, 2009 was
approximately $1.2 million.

Employee Stock Purchase Plan

In June 1999, the Companys Board of Directors and stockholders adopted the 1999 Employee Stock Purchase Plan (ESPP). The
Company has reserved a total of 700,000 shares of common stock for issuance under this plan. In accordance with Section 423 of the Internal Revenue Code, this plan permitted eligible employees to authorize payroll deductions of up to 10% of
their base compensation to purchase shares of the Companys common stock at the lower of 85% of the fair market value of the common stock on the first day of the offering period or the purchase date. In July 2005, the Company amended the ESPP,
permitting eligible employees to authorize payroll deductions of up to 10% of their base compensation to purchase shares of the Companys common stock at 95% of the fair market value of the common stock on the purchase date. As a result of this
amendment and the provisions of ASC 718, shares granted under the ESPP are non-compensatory. During the year ended December 31, 2009, the Company issued 8,470 shares of common stock to employees under the terms of the plan. As of
December 31, 2009, 123,790 shares remain available for purchase under the plan.

Preferred Shares

The Company is authorized to issue 5,610,969 shares of preferred stock. The Companys Board of Directors has the ability to determine
the rights and preferences of the preferred stock and can issue the preferred stock without the approval of the holders of the common stock. As of December 31, 2009, there are no shares of preferred stock outstanding.



48



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Common Shares

During 2007, the Company amended its certificate of incorporation to increase the number of shares of authorized common stock from 50,000,000 to 125,000,000 in connection with the acquisition of
Authorize.Net. The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders of the Company. Subject to the preferences that may be applicable to any outstanding shares of preferred stock, the
holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors.

The Company has reserved shares of common stock for future issuance at December 31, 2009 as follows:



|                                                                       |  |           
|---------------------------------------------------------------------- |  | ----------
|Options outstanding                                                    |  | 8,427,307 
|Options available for future grants                                    |  | 5,187,287 
|1999 Employee Stock Purchase Planshares available for future purchase |  | 123,790   
|                                                                       |  |           
|                                                                       |  | 13,738,384
|                                                                       |  |           

11.   Common Stock Repurchase Program

On April 22, 2008, the Board of Directors authorized management to use up to $10.0 million over a twelve-month period beginning on
May 5, 2008 to repurchase shares of the Companys common stock. During the period beginning May 5, 2008 and ending November 20, 2008, the Company repurchased 704,925 shares at an average price of $14.18 per share, including
repurchase costs.

On November 21, 2008, the Board of Directors authorized management to use up to $15.0 million to
repurchase shares of the Companys common stock through March 31, 2009. During the period beginning November 21, 2008 and ending December 31, 2008, the Company repurchased 88,781 shares at an average price of $7.95 per share,
including repurchase costs.

All of the repurchased shares were cancelled and returned to the status of authorized, unissued
shares. There were no repurchases of the Companys common stock during the year ended December 31, 2009.

12.   Related
Party Transactions

During the years ended December 31, 2009 and 2008, legal fees of approximately $0.7 million and
$0.1 million, respectively, were paid to Reed Smith, LLP, a law firm in which a director of the Company is a partner. In addition, during the years ended December 31, 2008 and 2007, legal fees of approximately $0.6 million and $1.2 million,
respectively, were paid to Morrison & Foerster LLP, a law firm in which a director of the Company was a partner. As of December 31, 2009 and 2008, the Company had immaterial amounts of accounts payable due to Reed Smith, LLP and
Morrison & Foerster, LLP, respectively.

For the years ended December 31, 2009, 2008 and 2007, the Company paid
fees of approximately $1.8 million, $1.0 million and $0.6 million, respectively, to CyberSource K.K. for services provided to certain customers. As of December 31, 2009 and 2008, the Company had immaterial amounts of accounts payable due to
CyberSource K.K.

The terms of the Companys contracts with the above related parties are consistent with its contracts
with other independent parties.

13.   Litigation and Contingencies

In July and August 2001, various class action lawsuits were filed in the United States District Court, Southern District of New York,
against the Company, its Chairman and CEO, a former officer, and four brokerage firms that served as underwriters in its initial public offering. The actions were filed on behalf of persons who purchased the Companys stock issued pursuant to
or traceable to the initial public offering. The action alleges that the Companys underwriters charged secret excessive commissions to certain of their customers in return for allocations of the Companys stock in the offering. The
lawsuit filed against the Company was one of several hundred lawsuits filed against other companies based on substantially similar claims. On April 2, 2009, the underwriters, issuers, insurance companies, individual defendants, and plaintiffs
filed with the court for approval a



49



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



finalized settlement agreement that was accepted by most parties to the litigation. On June 10, 2009, the court issued a preliminary approval of the settlement. On October 9, 2009, the
court issued a final order approving the settlement. Pursuant to the terms of the proposed settlement, the Companys insurer will cover any and all legal fees and damages payments on behalf of the Company and will waive the retention portion of
the coverage amount. Accordingly, the Company will incur no costs or expenses related to this litigation. On October 23, 2009, three individuals that opted out of the plaintiffs class, filed a petition in the United States Court of
Appeals for the Second Circuit, seeking permission to appeal the class certification. Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the matter.

On July 19, 2002, an action entitled Brian E. Wilgus and Robert C. Varner, Jr. v. CyberSource Corp., Civil Action No. 02-L-995,
was filed by plaintiffs on behalf of themselves and, purportedly, a class of all other similarly situated persons in the Circuit Court for the Third Judicial District, Madison County, IL. Plaintiffs became employees of CyberSource upon the closing
of the acquisition by CyberSource of PaylinX Corporation (the Merger). The plaintiffs employment with CyberSource were terminated in 2002 pursuant to a reduction in force. The action alleges that CyberSource breached contractual
obligations by not providing the plaintiffs with the ability to exercise stock options on a timely basis upon closing of the Merger. Plaintiffs seek unspecified damages and attorneys fees. On August 30, 2004, the court granted
certification of the plaintiff class, excluding roughly 25 former employees and officers that signed lock-up agreements and/or releases. The members of the class have been notified of the action, and, to the best of the Companys knowledge, two
employees have opted out of the litigation. Discovery has completed but a trial date has not yet been set. On September 5, 2006, the Company filed a motion for summary judgment. On October 2, 2006, Plaintiffs filed an opposition to the
Companys motion for summary judgment. On October 13, 2006, the Company filed a response to the Plaintiffs opposition. A hearing was held on December 7, 2006 on the motion for summary judgment. On January 22, 2008, the
court granted the Companys motion for summary judgment. On January 31, 2008, Plaintiff filed a notice of appeal. On June 9, 2008, Plaintiff filed its appeal brief. On August 19, 2008, the Company filed a response brief. On
January 7, 2009, a hearing was held by the court. On August 27, 2009, the district appellate court issued a decision reversing the summary judgment granted by the trial court. On September 25, 2009, the Company filed a Petition for
Leave with the Supreme Court of the State of Illinois. On November 4, 2009, Plaintiffs filed an answer to the Companys petition. On November 25, 2009, the Supreme Court of the State of Illinois denied the Companys petition for
appeal and the case is in the process of being sent back down to the Appellate District. Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the matter.

On August 11, 2004, the Company filed suit in the Northern District of California (the District Court) against Retail
Decisions, Inc. (ReD US) and Retail Decisions Plc (ReD UK) (collectively, ReD), Case No. 3:04-CIV-03268, alleging that ReD infringes the Companys U.S. Patent No. 6,029,154 (the 154
Patent). ReD filed a motion to stay the case pending a determination by the U.S. Patent and Trademark Office (PTO) as to whether it will grant ReDs request that the PTO re-examine the 154 Patent. In addition, based on
ReD UKs representation that ReD US is the sole entity that develops, operates, and distributes the eBitGuard service, the Company agreed to dismiss ReD UK while reserving the right to reinstitute action against ReD UK in the event the Company
later discovers that ReD UK is subject to the District Courts personal jurisdiction. On August 9, 2006, the PTO issued a final office action rejecting all of the claims of the 154 Patent. On May 3, 2007, the PTO issued a
Notice of Intent to Issue Reexam Certificate, reversing its action of August 9, 2006. On August 5, 2008, the PTO issued the Ex Parte Reexamination Certificate. Accordingly, the patent was re-validated. On April 25, 2008,
litigation proceedings in the case were reinstated. In October 2008, ReD filed two motions for summary judgment. On November 24, 2008, the District Court denied one of the motions and ruled that the other motion was premature. On
January 26, 2009, ReD filed three additional motions for summary judgment. On March 27, 2009, the District Court granted summary judgment, finding the Companys patent claims invalid based on the patentability standard articulated in
In re Bilski.On April 15, 2009, the District Court issued a judgment invalidating the patent.On May 13, 2009, the Company filed a notice of appeal. On July 8, 2009, the Company filed a motion to stay the appeal pending
the outcome of Bilski vs. Doll, which is currently pending before the U.S. Supreme Court and which was the basis for the District Courts March 27, 2009 decision in our case. While there can be no assurances as to the outcome of an
appeal, the Company does not presently believe that the continuation of this lawsuit would have a material effect on its financial condition, results of operations, or cash flows.

On April 1, 2009, John Pettitt, Murphy Labrador Corporation and Max GSD Trust filed suit in the Superior Court of California, Marin
County, entitled John Pettitt, et al. v. CyberSource Corporation, et al., No. CIV 091005. The Companys stock transfer agent, American Stock Transfer & Trust Company (AS&T), is also a named defendant. The Company
was served with



50



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



a First Amended Complaint on or around April 20, 2009. The complaint alleges, among other things, breach of contract, conversion, breach of fiduciary duty, and negligent infliction of
emotional distress, arising from the transfer by AS&T of 100,000 shares of CyberSource common stock that were owned by Murphy Labrador Corporation to the State of California under Californias Unclaimed Property Law (UPL). Upon
receipt of the shares from AS&T, and pursuant to the UPL, the State of California sold the shares at approximately $6.63 per share. The proceeds of the sale of the shares were recovered by Murphy Labrador Corporation, but plaintiffs are seeking
re-issuance of the 100,000 shares or alternatively special damages of $877,000, unspecified consequential damages, interest, attorneys fees, and punitive damages. On June 4, 2009, the Company filed a demurrer to dismiss the case. Prior to
a scheduled hearing on the demurrer, plaintiffs filed a Second Amended Complaint on July 24, 2009. On August 17, 2009, the Company filed an answer to the Second Amended Complaint denying all allegations and asserting affirmative defenses.
In December 2009, the parties participated in a court ordered mediation. While there can be no assurances as to the outcome of the lawsuit, the Company does not presently believe that the lawsuit would have a material effect on its financial
condition, results of operations, or cash flows.

The Company is currently party to various legal proceedings and claims which
arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, the Company does not believe that the outcome of any of these claims or any of the above mentioned legal matters will have a material
adverse effect on its consolidated financial position, results of operations or cash flows.

14.   Income Taxes

The components of income before income taxes are as follows (in thousands):



|                    |  |              |        |      |   |       |  |   |       |  
|------------------- |  | ------------ | ------ | ---- | - | ----- |  | - | ----- | -
|                    |  | December 31, |       
|                    |  | 2009         |        | 2008 |   | 2007  | 
|Domestic            |  | $            | 15,310 |      | $ | 1,053 |  | $ | (1    | )
|Foreign             |  |              | 1,133  |      |   | 2,323 |  |   | 2,111 |  
|                    |  |              |        |      |   |       |  |   |       |  
|Income before taxes |  | $            | 16,443 |      | $ | 3,376 |  | $ | 2,110 |  
|                    |  |              |        |      |   |       |  |   |       |  

The Companys provision (benefit) for income taxes consists of the following (in thousands):



|                                            |  |              |        |   |      |   |         |      |  |   |        |  
|------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                            |  | December 31, |       
|                                            |  | 2009         |        |   | 2008 |   |         | 2007 | 
|Current income taxes:                       |  |              |        |   |      |   |         |      |  |   |        |  
|Federal                                     |  | $            | 441    |   |      | $ | 299     |      |  | $ | 319    |  
|State                                       |  |              | 1,618  |   |      |   | 934     |      |  |   | 99     |  
|Foreign                                     |  |              | 266    |   |      |   | 1,625   |      |  |   |       |  
|                                            |  |              |        |   |      |   |         |      |  |   |        |  
|Total current income tax expense            |  |              | 2,325  |   |      |   | 2,858   |      |  |   | 418    |  
|                                            |  |              |        |   |      |   |         |      |  |   |        |  
|Deferred income taxes:                      |  |              |        |   |      |   |         |      |  |   |        |  
|Federal                                     |  |              | 4,178  |   |      |   | (8,480  | )    |  |   | (1,101 | )
|State                                       |  |              | (1,448 | ) |      |   | (1,687  | )    |  |   | (301   | )
|Foreign                                     |  |              | 423    |   |      |   | (44     | )    |  |   | 665    |  
|                                            |  |              |        |   |      |   |         |      |  |   |        |  
|Total deferred income tax expense (benefit) |  |              | 3,153  |   |      |   | (10,211 | )    |  |   | (737   | )
|                                            |  |              |        |   |      |   |         |      |  |   |        |  
|Total expense (benefit) for income taxes    |  | $            | 5,478  |   |      | $ | (7,353  | )    |  | $ | (319   | )
|                                            |  |              |        |   |      |   |         |      |  |   |        |  



51



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



A reconciliation between the tax provision computed at the statutory income tax rate and
the Companys actual effective income tax provision (benefit) is as follows (in thousands):



|                                     |  |              |       |   |      |   |        |      |  |   |      |  
|------------------------------------ |  | ------------ | ----- | - | ---- | - | ------ | ---- |  | - | ---- | -
|                                     |  | December 31, |      
|                                     |  | 2009         |       |   | 2008 |   |        | 2007 | 
|Provision at statutory rate          |  | $            | 5,756 |   |      | $ | 1,182  |      |  | $ | 738  |  
|State income taxes                   |  |              | 812   |   |      |   | 163    |      |  |   | 113  |  
|Other                                |  |              | (890  | ) |      |   | 209    |      |  |   | (17  | )
|Foreign tax impact                   |  |              | (20   | ) |      |   | 655    |      |  |   | (218 | )
|Stock-based compensation             |  |              | (180  | ) |      |   | 185    |      |  |   | 33   |  
|Decrease in valuation allowance      |  |              |      |   |      |   | (9,747 | )    |  |   | (968 | )
|                                     |  |              |       |   |      |   |        |      |  |   |      |  
|Provision (benefit) for income taxes |  | $            | 5,478 |   |      | $ | (7,353 | )    |  | $ | (319 | )
|                                     |  |              |       |   |      |   |        |      |  |   |      |  

During 2008, the Company recorded an income tax benefit of approximately $7.4 million. This benefit included
a $10.3 million reduction in the Companys remaining valuation allowance related to its deferred tax assets that will more likely than not be realized. During 2007, the Company recorded an income tax benefit of approximately $0.3 million. This
benefit included a $1.0 million reduction in the Companys valuation allowance related to a portion of its deferred tax assets that will more likely than not be realized. In addition, as a result of the acquisition of Authorize.Net, the Company
recorded as an adjustment to goodwill a $34.5 million reduction in the valuation allowance related to deferred tax assets established in purchase accounting.

In evaluating its ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including its past operating results, the existence of cumulative losses
and its forecast of future taxable income. In determining future taxable income, the Company is responsible for assumptions utilized including the amount of state, federal and international pre-tax operating income, the reversal of temporary
differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to
manage the underlying businesses.

As of December 31, 2009, the Company had $148.4 million federal and $49.3 million
state net operating loss carryforwards available to reduce future taxable income. Of these amounts, $43.5 million and $9.5 million, respectively, represent tax deductions from stock option compensation which will be recorded as an adjustment to
additional paid-in capital when they reduce taxes payable. If the Company is not able to use them, the federal and state net operating loss carryforwards will expire in 2013 through 2024. Internal Revenue Code Section 382 imposes substantial
restrictions on the utilization of net operating losses and tax credits in the event of a corporations ownership change, as defined in the Internal Revenue Code. The Companys ability to utilize net operating loss carryforwards may be
limited if such an ownership change occurs.

As of December 31, 2009, the Company also had research and development tax
credit carryforwards of approximately $3.6 million and $0.8 million for federal and state income tax purposes, respectively. The federal carryforward will expire at various dates beginning in 2018 through 2029. The state carryforward can be carried
forward indefinitely. The Company also has federal alternative minimum tax credits of approximately $1.4 million, which do not expire.

The Company has not provided for U.S. federal income and state income taxes on non-U.S. subsidiaries undistributed earnings as of December 31, 2009, because such earnings are intended to be reinvested in the operations and
potential acquisitions of its international subsidiaries indefinitely. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to applicable U.S. federal and state income taxes.



52



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The components of the net deferred tax assets are as follows (in thousands):



|                                          |  |              |         |   |      |   |         |  
|----------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                          |  | December 31, |        
|                                          |  | 2009         |         |   | 2008 |  
|Deferred tax assets:                      |  |              |         |   |      |   |         |  
|Net operating loss carryforwards          |  | $            | 38,845  |   |      | $ | 52,959  |  
|Tax credit carryforwards                  |  |              | 5,396   |   |      |   | 4,857   |  
|Depreciation differences                  |  |              | 5,516   |   |      |   | 7,946   |  
|Non-deductible stock compensation charges |  |              | 7,768   |   |      |   | 6,393   |  
|Other, net                                |  |              | 3,770   |   |      |   | 2,635   |  
|                                          |  |              |         |   |      |   |         |  
|Deferred tax assets                       |  |              | 61,295  |   |      |   | 74,790  |  
|                                          |  |             
|Deferred tax liabilities:                 |  |              |         |   |      |   |         |  
|Acquired intangibles                      |  |              | (41,301 | ) |      |   | (51,643 | )
|                                          |  |              |         |   |      |   |         |  
|Net deferred tax assets                   |  | $            | 19,994  |   |      | $ | 23,147  |  
|                                          |  |              |         |   |      |   |         |  

Under ASC 740, deferred tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. As a result of adopting ASC 718, the deferred tax asset balances at
December 31, 2009 and 2008 did not include excess tax benefits from stock option exercises.

In addition, ASC 740
clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements. This topic prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition.

As of December 31, 2009, the Company has provided a liability of approximately $1.8 million representing unrecognized
tax benefits relating to various federal, state, and foreign income tax matters which is classified as other non-current tax liabilities in the Companys balance sheet. All of this amount would impact the Companys effective tax rate, if
recognized. The Company does not expect that the amounts of unrecognized tax benefits will change significantly within the next twelve months.

As of December 31, 2009, the Company has accrued approximately $0.6 million of interest related to uncertain tax positions. The Company accounts for interest related to uncertain tax positions as
part of its provision for federal and state income taxes.

A reconciliation of the beginning and ending balance of the
consolidated liability for unrecognized income tax benefits is as follows (in thousands):



|                                                        |  |      |       |   |      |   |        |  
|------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ------ | -
|                                                        |  | 2009 |       |   | 2008 |  
|Balance at January 1,                                   |  | $    | 4,672 |   |      | $ | 1,787  |  
|Additions for tax positions of prior years              |  |      | 2,124 |   |      |   | 3,799  |  
|Additions for tax positions related to the current year |  |      | 666   |   |      |   | 795    |  
|Reductions for tax positions of prior years             |  |      | (702  | ) |      |   | (1,709 | )
|Settlements during the year                             |  |      | (91   | ) |      |   |       |  
|                                                        |  |      |       |   |      |   |        |  
|Balance at December 31,                                 |  | $    | 6,669 |   |      | $ | 4,672  |  
|                                                        |  |      |       |   |      |   |        |  

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various U.S.
states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2003. Tax years from 2003 through 2009 remain open to
examination by U.S. federal, state and local, or non-U.S. tax jurisdictions.



53



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



15.   Employee Savings and Retirement Plan

The Company maintains a defined contribution plan under Internal Revenue Service Code 401(k) (the 401(k) Plan). The 401(k) Plan
provides for tax deferred salary deductions. Employees can elect to contribute to the 401(k) Plan up to 20% of their salary, subject to current statutory limits. The Company began to contribute to the 401(k) Plan in 2008 and made contributions of
approximately $0.9 million for both of the years ended December 31, 2009 and 2008.

16.   Net Income Per Share

The following table reconciles the numerators and denominators of the net income per share calculation for the years
ended December 31, 2009, 2008 and 2007 (in thousands, except per share data):



|                                                                               |  |              |        |      |   |        |  |   |       
|------------------------------------------------------------------------------ |  | ------------ | ------ | ---- | - | ------ |  | - | ------
|                                                                               |  | December 31,
|                                                                               |  | 2009         |        | 2008 |   | 2007  
|Basic net income per share computation:                                        |  |              |        |      |   |        |  |   |       
|Net income                                                                     |  | $            | 10,965 |      | $ | 10,729 |  | $ | 2,429 
|                                                                               |  |              |        |      |   |        |  |   |       
|Weighted-average common shares outstanding                                     |  |              | 69,530 |      |   | 69,132 |  |   | 40,736
|                                                                               |  |              |        |      |   |        |  |   |       
|Basic net income per share attributable to common stockholders                 |  | $            | 0.16   |      | $ | 0.16   |  | $ | 0.06  
|                                                                               |  |              |        |      |   |        |  |   |       
|Diluted net income per share computation:                                      |  |              |        |      |   |        |  |   |       
|Net income                                                                     |  | $            | 10,965 |      | $ | 10,729 |  | $ | 2,429 
|                                                                               |  |              |        |      |   |        |  |   |       
|Weighted-average common shares outstanding                                     |  |              | 69,530 |      |   | 69,132 |  |   | 40,736
|Incremental shares attributable to the assumed exercise of outstanding options |  |              | 2,415  |      |   | 2,657  |  |   | 2,489 
|                                                                               |  |              |        |      |   |        |  |   |       
|Total diluted weighted average common shares                                   |  |              | 71,945 |      |   | 71,789 |  |   | 43,225
|                                                                               |  |              |        |      |   |        |  |   |       
|Diluted net income per share attributable to common stockholders               |  | $            | 0.15   |      | $ | 0.15   |  | $ | 0.06  
|                                                                               |  |              |        |      |   |        |  |   |       

The computation of diluted net income per share
excluded approximately 739,000, 737,000 and 1,039,000 options to purchase shares of common stock for the years ended December 31, 2009, 2008 and 2007, respectively, because the effect would have been antidilutive.

17.   Guarantees

From time to time, the Company enters into certain types of contracts that require the Company to indemnify parties against third-party claims on a contingent basis. These contracts primarily relate to: (i) licenses for software and
services; (ii) certain real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Companys use of the applicable premises; and
(iii) certain agreements with the Companys officers, directors and employees, under which the Company may be required to indemnify such persons for liabilities arising out of their employment relationship.

The terms of such obligations vary. Generally, a maximum obligation is not explicitly stated. Because the obligated amounts of these types
of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have
been recorded for these obligations on its balance sheet as of December 31, 2009 or 2008.



54



---

##### Table of Contents

CYBERSOURCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



18.  Quarterly Financial Information (Unaudited)

Summarized quarterly financial information for fiscal 2009 and 2008 is as follows (in thousands, except per share data):



|                             |  |              |        |               |   |        |              |  |               |        |            |   |        |  |   |        
|---------------------------- |  | ------------ | ------ | ------------- | - | ------ | ------------ |  | ------------- | ------ | ---------- | - | ------ |  | - | -------
|                             |  | FirstQuarter |        | SecondQuarter |   |        | ThirdQuarter |  | FourthQuarter |        | FiscalYear
|Fiscal 2009                  |  |              |        |               |   |        |              |  |               |        |           
|Revenues                     |  | $            | 60,491 |               | $ | 62,889 |              |  | $             | 65,662 |            | $ | 76,094 |  | $ | 265,136
|Gross profit                 |  |              | 32,510 |               |   | 33,658 |              |  |               | 34,819 |            |   | 39,085 |  |   | 140,072
|Net income                   |  |              | 1,010  |               |   | 2,181  |              |  |               | 2,694  |            |   | 5,080  |  |   | 10,965 
|Basic net income per share   |  | $            | 0.01   |               | $ | 0.03   |              |  | $             | 0.04   |            | $ | 0.07   |  | $ | 0.16   
|Diluted net income per share |  | $            | 0.01   |               | $ | 0.03   |              |  | $             | 0.04   |            | $ | 0.07   |  | $ | 0.15   
|                             |  |              |        |               |  
|Fiscal 2008                  |  |              |        |               |   |        |              |  |               |        |           
|Revenues                     |  | $            | 53,420 |               | $ | 55,659 |              |  | $             | 57,693 |            | $ | 62,254 |  | $ | 229,026
|Gross profit                 |  |              | 27,592 |               |   | 28,101 |              |  |               | 29,574 |            |   | 31,991 |  |   | 117,258
|Net income (loss)            |  |              | 533    |               |   | (45    | )            |  |               | 207    |            |   | 10,034 |  |   | 10,729 
|Basic net income per share   |  | $            | 0.01   |               | $ |       |              |  | $             |       |            | $ | 0.15   |  | $ | 0.16   
|Diluted net income per share |  | $            | 0.01   |               | $ |       |              |  | $             |       |            | $ | 0.14   |  | $ | 0.15   

The fourth quarter
fiscal 2008 net income includes a reduction in the Companys deferred tax asset valuation allowance of $10.3 million. The fourth quarter fiscal 2009 net income includes a reversal of stock compensation expense of approximately $2.1 million
relating to a stock option grant that was cancelled prior to it vesting. The first and fourth quarter fiscal 2009 net income includes restructuring and other non-recurring charges of approximately $0.9 million and $0.6 million, respectively. The
first, third and fourth quarter fiscal 2008 net income includes restructuring and other non-recurring charges of approximately $0.1 million, $0.3 million and $0.5 million, respectively.



55



---

##### Table of Contents

|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

Not Applicable



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure Controls and Procedures

Our management, under the supervision and with the participation of Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of CyberSources disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d -15(f) under the Exchange Act). Our internal
control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.

As of the end of the period covered by this report, our management carried out an evaluation, under the
supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of CyberSources internal control over financial reporting. In making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was effective.

It should be noted that internal control over financial reporting can provide only reasonable, not absolute, assurance of achieving
financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human
failures. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our independent registered public accounting firm, Ernst & Young LLP, has audited the consolidated financial statements included in
this Annual Report on Form 10-K and has issued its report on the effectiveness of our internal control over financial reporting as of December 31, 2009.

Changes in Internal Control Over Financial Reporting

There were no changes in
our internal control over financial reporting during the fiscal quarter ended December 31, 2009 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.



56



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

CyberSource Corporation

We have audited CyberSource Corporations internal control over financial reporting as
of December 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). CyberSource Corporations management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, CyberSource Corporation maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of CyberSource Corporation as of December 31, 2009 and 2008, and the related consolidated
statements of income, stockholders equity and cash flows for each of the three years in the period ended December 31, 2009 of CyberSource Corporation and our report dated February 26, 2010 expressed an unqualified opinion thereon.

/s/    ERNST & YOUNG LLP

San Jose, California

February 26, 2010



57



---

##### Table of Contents

|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

Not
applicable.

PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information required by this item is incorporated by reference to our Proxy Statement for the 2010 Annual Meeting of Stockholders (to be filed with the Securities and Exchange Commission within 120
days of our December 31, 2009 fiscal year end) under the headings Election of Directors, Board and Corporate Governance Matters, Management, and Other Information.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information required by this item is incorporated by reference to our Proxy Statement for the 2010 Annual Meeting of Stockholders (to be filed with the Securities and Exchange Commission within 120 days of our December 31, 2009
fiscal year end) under the headings Board and Corporate Governance Matters, Executive Officer and Director Compensation, and Compensation Committee Report.



|ITEM  12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|--------- | ----------------------------------------------------------------------------------------------

The information required by this item is incorporated by reference to our Proxy Statement for the 2010 Annual Meeting of Stockholders (to be
filed with the Securities and Exchange Commission within 120 days of our December 31, 2009 fiscal year end) under the headings Security Ownership of Beneficial Owners and Management and Equity Compensation Plan
Information.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information required by this item is incorporated by reference to our Proxy Statement for the 2010 Annual Meeting of Stockholders (to be
filed with the Securities and Exchange Commission within 120 days of our December 31, 2009 fiscal year end) under the headings Board and Corporate Governance Matters and Certain Related Person Transactions.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The information required by this item is incorporated by reference to our Proxy Statement for the 2010 Annual Meeting of Stockholders (to be filed with the Securities and Exchange Commission within 120
days of our December 31, 2009 fiscal year end) under the heading Ratification of Appointment of Independent Registered Public Accounting Firm.

PART IV



|ITEM  15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|--------- | ------------------------------------------

Financial Statements

The following financial statements are filed as part of this Annual Report on Form 10-K
and set forth on the page indicated:



|                                                        |  |     
|------------------------------------------------------- |  | ----
|                                                        |  | Page
|Report of Independent Registered Public Accounting Firm |  | 33  
|Consolidated Balance Sheets                             |  | 34  
|Consolidated Statements of Income                       |  | 35  
|Consolidated Statements of Stockholders Equity         |  | 36  
|Consolidated Statements of Cash Flows                   |  | 37  
|Notes to Consolidated Financial Statements              |  | 38  



58



---

##### Table of Contents

Financial Statement Schedule

Schedule IIValuation and Qualifying Accounts is set forth on page 58 of this Annual Report on Form 10-K. All other schedules are
omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements and the Notes thereto.

Exhibits

The exhibits required by Item 601 of Regulation S-K are set
forth on the exhibit index that follows the signature page to this Annual Report on Form 10-K.



59



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized, in Mountain View, California on the 26th day of February, 2010.



CYBERSOURCE CORPORATIONBy:

/s/

MICHAEL A. WALSHMichael A. Walsh President and Chief Executive Officer


Pursuant to the requirements
of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.



|    |  |                        |  |                                                                                                           |  |                  
|--- |  | ---------------------- |  | --------------------------------------------------------------------------------------------------------- |  | -----------------
|    |  | Signature              |  | Title                                                                                                     |  | Date             
|    |  |                        | 
|/S/ |  | MICHAEL A. WALSH       |  | President and Chief Executive Officer (Principal Executive Officer)                                       |  | February 26, 2010
|    |  | Michael A. Walsh       |  |                                                                                                           | 
|    |  |                        | 
|/S/ |  | STEVEN D. PELLIZZER    |  | Chief Financial Officer and Senior Vice President of Finance (Principal Financial and Accounting
Officer) |  | February 26, 2010
|    |  | Steven D. Pellizzer    |  |                                                                                                           | 
|    |  |                        |  |                                                                                                           | 
|    |  |                        | 
|/S/ |  | WILLIAM S. MCKIERNAN   |  | Executive Chairman of the Board of Directors                                                              |  | February 26, 2010
|    |  | William S. McKiernan   |  |                                                                                                           | 
|    |  |                        | 
|/S/ |  | ROBERT E. DONAHUE      |  | Director                                                                                                  |  | February 26, 2010
|    |  | Robert E. Donahue      |  |                                                                                                           |  |                  
|    |  |                        | 
|/S/ |  | JOHN J. MCDONNELL, JR. |  | Director                                                                                                  |  | February 26, 2010
|    |  | John J. McDonnell, Jr. |  |                                                                                                           |  |                  
|    |  |                        | 
|/S/ |  | STEVEN P. NOVAK        |  | Director                                                                                                  |  | February 26, 2010
|    |  | Steven P. Novak        |  |                                                                                                           |  |                  
|    |  |                        | 
|/S/ |  | CARL F. PASCARELLA     |  | Director                                                                                                  |  | February 26, 2010
|    |  | Carl F. Pascarella     |  |                                                                                                           | 
|    |  |                        | 
|/S/ |  | RICHARD SCUDELLARI     |  | Director                                                                                                  |  | February 26, 2010
|    |  | Richard Scudellari     |  |                                                                                                           |  |                  
|    |  |                        | 
|/S/ |  | KENNETH R. THORNTON    |  | Director                                                                                                  |  | February 26, 2010
|    |  | Kenneth R. Thornton    |  |                                                                                                           |  |                  



60



---

##### Table of Contents

CYBERSOURCE CORPORATION

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

December 31, 2007, 2008 and 2009

(In thousands)



|                                |  |                            |       |                                                         |   |                          |  |                       |       |  |   |      
|------------------------------- |  | -------------------------- | ----- | ------------------------------------------------------- | - | ------------------------ |  | --------------------- | ----- |  | - | -----
|                                |  | Balanceat Beginningof Year |       | Amounts Acquiredor Chargedto Revenue, Costs,or Expenses |   | Write-offs andRecoveries |  | Balance atEnd of Year
|2007                            |  |                            |       |                                                         |   |                          |  |                       |       |  |   |      
|Allowance for Doubtful Accounts |  | $                          | 493   |                                                         | $ | 1,209                    |  | $                     | 968   |  | $ | 734  
|2008                            |  |                            |       |                                                         |   |                          |  |                       |       |  |   |      
|Allowance for Doubtful Accounts |  | $                          | 734   |                                                         | $ | 2,270                    |  | $                     | 1,934 |  | $ | 1,070
|2009                            |  |                            |       |                                                         |   |                          |  |                       |       |  |   |      
|Allowance for Doubtful Accounts |  | $                          | 1,070 |                                                         | $ | 2,858                    |  | $                     | 2,608 |  | $ | 1,320



61



---

##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                                               
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Document                                                                                                                                                                                                                                                                                      
|3.1           |  | Certificate of Incorporation of the Registrant, as amended and restated (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended
December 31, 2007 filed March 11, 2008)                                                                         
|              | 
|3.2           |  | Bylaws of the Registrant, as amended (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the period ended March 31, 2009 filed May 8,
2009)                                                                                                                    
|              | 
|10.1          |  | Lease Agreement dated November 3, 1999 by and between Shoreline Investments V and CyberSource Corporation (incorporated by reference to Exhibit 10.19 to the Annual Report on Form
10-K for the fiscal year ended December 31, 1999 filed March 30, 2000)                                     
|              | 
|10.2          |  | Second Amendment, dated December 30, 2004, to Lease, dated November 3, 1999 by and between Shoreline Investments V and CyberSource Corporation (incorporated by reference to Exhibit
10.13 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed March 10, 2005)
|              | 
|10.3+         |  | 1999 Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended March 31, 2008 filed May 6,
2008)                                                                                                        
|              | 
|10.4+         |  | 1999 Employee Stock Purchase Plan, as amended and restated (incorporated by reference to Exhibit 10.8 to the Quarterly Report on Form 10-Q for the period ended June 30, 2006 filed
August 9, 2006)                                                                                           
|              | 
|10.5+         |  | CyberSource Corporation 2009 Executive Bonus Plan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended March 31, 2009 filed May 8,
2009)                                                                                                      
|              | 
|10.6+         |  | Executive Employment Agreement dated December 10, 2009 between the Registrant and Michael A. Walsh (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed
December 10, 2009)                                                                                      
|              | 
|10.7+         |  | 2009 Michael Walsh Commission and Bonus Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the period ended March 31, 2009 filed May 8, 2009)*                                                                                                          
|              | 
|10.8+         |  | Executive Employment Agreement dated March 31, 2006, by and between CyberSource Corporation and Scott Cruickshank (incorporated by reference to Exhibit 10.15 to the Quarterly Report
on Form 10-Q for the period ended March 31, 2006 filed May 9, 2006)                                     
|              | 
|10.9+         |  | Form of CyberSource Executive Retention Agreement (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed December 10, 2009)                                                                                                                                       
|              | 
|10.10+        |  | Executive Retention Agreement between the Registrant and Michael A. Walsh                                                                                                                                                                                                                     
|              | 
|23.1          |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                     
|              | 
|31.1          |  | Certification of Michael A. Walsh, President and Chief Executive Officer of the Registrant pursuant to Section 302 of the Sarbanes- Oxley Act of 2002                                                                                                                                         
|              | 
|31.2          |  | Certification of Steven D. Pellizzer, Chief Financial Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                     
|              | 
|32.1          |  | Certification of Michael A. Walsh, President and Chief Executive Officer of the Registrant pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002                                                                                                   
|              | 
|32.2          |  | Certification of Steven D. Pellizzer, Chief Financial Officer of the Registrant pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                                                              



|+ | Management contract or compensation plan, contract or arrangement.
|- | ------------------------------------------------------------------

|* | A portion of this exhibit has been omitted pursuant to a grant of confidential treatment by the Securities and Exchange Commission on June 12, 2009.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------



62