Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(9) Commitments and Contingencies

Leases

The Company leases managed and co-location facilities for data center capacity and office space under noncancellable operating lease agreements with various expiration dates. The data centers are located in the United States, the Netherlands, the United Kingdom, Switzerland, Canada, and Australia. Expenses at the co-location facilities consist primarily of space, power, cooling and ancillary services. The Company’s managed facilities include the same expenses as co-location facilities as well as expenses related to leases of equipment, such as servers, networking equipment, and storage infrastructure. Rent expense associated with these facilities, included in cost of revenues, was $3.5 million and $1.7 million for the three months ended September 30, 2012 and 2011, respectively, and $9.2 million and $4.4 million for the nine months ended September 30, 2012 and 2011, respectively.

The Company’s principal office is located in San Diego, California and leases office space in the United States, the United Kingdom, Germany, Australia, the Netherlands, Canada, Denmark, France, Sweden, and Israel. Rent expense associated with these leases was $1.2 million and $0.6 million for the three months ended September 30, 2012 and 2011, respectively, and $3.0 million and $2.3 million for the nine months ended September 30, 2012 and 2011, respectively. During the nine months ended September 30, 2011, the Company relocated its San Diego office and terminated a lease on its former premises. The termination fee of $0.7 million is included in rent expense for the nine months ended September 30, 2011.

Annual future minimum payments under these operating leases were as follows as of September 30, 2012 (in thousands):

	Data Centers		Office Leases		Total
Fiscal Period:
Remaining three months ended December 31, 2012	$	2,982	$	916	$	3,898
2013		8,174		5,395		13,569
2014		5,314		5,162		10,476
2015		546		4,837		5,383
2016		—		5,044		5,044
Thereafter		—		18,392		18,392
Total minimum lease payments	$	17,016	$	39,746	$	56,762

In September 2012, the Company signed a lease for a total of 43,590 square-feet of office space located in Amsterdam. The square-footage for the first year is approximately 17,857 and increases incrementally over the term of the lease, with total minimum lease commitments of approximately $10.5 million. The lease is for a period of 10.5 years and commences on October 1, 2012.

Lease commitments of $10.2 million related to the lease for the Company’s former San Diego office are also included in the table above. Upon vacating its former San Diego office in August 2012, the Company recorded a cease-use loss of $0.2 million and a corresponding facility exit obligation of $3.0 million, as the Company is further obligated for certain ongoing operating costs.

Legal Proceedings

From time to time, the Company is party to litigation and other legal proceedings in the ordinary course of business. While the results of any litigation or other legal proceedings are uncertain, management does not believe the ultimate resolution of any pending legal matters is likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows, except for those matters for which the Company has recorded a loss contingency. The Company accrues for loss contingencies when it is both probable that it will incur the loss and when the amount of the loss can be reasonably estimated.

Generally, the Company’s subscription agreements require it to indemnify its customers for third-party intellectual property infringement claims. Any adverse determination related to intellectual property claims or litigation could prevent the Company from offering its service and adversely affect its financial condition and results of operations.