Datawatch (DWCH)

Datawatch markets its products through a variety of channels in order to gain broad market exposure and to satisfy the needs of its customers.  Datawatch believes that some customers prefer to purchase products through service-oriented resellers, while others buy on the basis of price, purchase convenience, and/or immediate delivery.

The Company is engaged in active direct sales of its products to end-users, including repeat and add-on sales to existing customers and sales to new customers.  Datawatch utilizes direct mail, the Internet, telemarketing and direct personal selling to generate its sales.

Datawatch uses a variety of marketing programs to create demand for its products. These programs include

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advertising, cooperative advertising with reseller partners, direct mail, exhibitor participation in industry shows, executive participation in press briefings, Internet-based marketing and on-going communication with the trade press.

The Company offers certain of its resellers the ability to return obsolete versions of its products and slow-moving products for credit. Based on its historical experience relative to products sold to these distributors, the Company believes that its exposure to such returns is minimal. It has provided a provision for such estimated returns in the financial statements.

Datawatch warrants the physical disk media and printed documentation for its products to be free of defects in material and workmanship for a period of 30 to 90 days from the date of purchase depending on the product.  Datawatch also offers a 30 day or 60 day money-back guarantee on certain of its products sold directly to end-users. Under the guarantee, customers may return purchased products within the 30 day or 60 day period for a full refund if they are not completely satisfied. To date, the Company has not experienced any significant product returns under its money-back guarantee.

During fiscal 2006, 2005 and 2004, one distributor, Ingram Micro Inc., represented approximately 15%, 19% and 20%, respectively, of the Company’s total revenue.  During fiscal 2006, another distributor, Tech Data, represented approximately 13% of the Company’s total revenue. No other customer accounted for more than 10% of the Company’s total revenue in fiscal 2006, 2005 or 2004. Datawatch’s revenues from outside of the U.S. are primarily the result of sales through the direct sales force of its wholly-owned subsidiary, Datawatch International Limited and its subsidiaries (“Datawatch International”) and through international resellers. Such international sales (which are primarily in the UK), not including export sales from domestic operations, represented approximately 32%, 36% and 39% of the Company’s total revenue for fiscal 2006, 2005 and 2004, respectively.  See Note 10 to the Company’s Consolidated Financial Statements for segment information.

Datawatch markets its products through a variety of channels in order to gain broad market exposure and to satisfy the needs of its customers.  Datawatch believes that some customers prefer to purchase products through service-oriented resellers, while others buy on the basis of price, purchase convenience, and/or immediate delivery.

The Company is engaged in active direct sales of its products to end-users, including repeat and add-on sales to existing customers and sales to new customers.  Datawatch utilizes direct mail, the Internet, telemarketing and direct personal selling to generate its sales.

Datawatch uses a variety of marketing programs to create demand for its products.  These programs include advertising, cooperative advertising with reseller partners, direct mail, exhibitor participation in industry shows, executive participation in press briefings, Internet-based marketing and on-going communication with the trade press.

The Company offers certain of its resellers the ability to return obsolete versions of its products and slow-moving products for credit.  Based on its historical experience relative to products sold to these distributors, the Company believes that its exposure to such returns is minimal.  It has provided a provision for such estimated returns in the financial statements.

Datawatch warrants the physical disk media and printed documentation for its products to be free of defects in material and workmanship for a period of 30 to 90 days from the date of purchase depending on the product.  Datawatch also offers a 30 day or 60 day money-back guarantee on certain of its products sold directly to end-users.  Under the guarantee, customers may return purchased products within the 30 day or 60 day period for a full refund if they are not completely satisfied.  To date, the Company has not experienced any significant product returns under its money-back guarantee.

During fiscal 2005, 2004 and 2003, one distributor, Ingram Micro Inc., represented approximately 19%, 20% and 19%, respectively, of the Company’s total revenue.  No other customer accounted for more than 10% of the Company’s total revenue in fiscal 2005, 2004 or 2003.  Datawatch’s revenues from outside of the U.S. are primarily the result of sales through the direct sales force of its wholly-owned subsidiary, Datawatch International Limited and its subsidiaries (“Datawatch International”) and through international resellers.  Such international sales (which are primarily in the UK), not including export sales from domestic operations, represented approximately 36%, 39% and 38% of the Company’s total revenue for fiscal 2005, 2004 and 2003, respectively.  See Note 11 to the Consolidated Financial Statements which appear elsewhere herein.