8x8 1999 Annual Report Download - page 26

defend against the alleged claims of infringement. Such litigation could result in substantial costs and diversion of management time and
resources and could have a material adverse effect on the Company's business and operating results. If the Company were found to be
infringing on the alleged intellectual property rights of the Lemelson Medical Foundation, the Company could be subject to liabilities for such
infringement, which could be material, and the Company could be required to refrain from using, manufacturing or selling certain products or
using certain processes, either of which could have a material adverse effect on the Company's business and operating results.
COMPLIANCE WITH REGULATIONS AND INDUSTRY STANDARDS
Circuit-switched networks such as the PSTN feature a very high reliability, with a guaranteed QoS. The common standard for reliability of
carrier-grade real-time voice communications is 99.999%, meaning that the network can be down for only a few minutes per year. In addition,
such networks have imperceptible delay and consistently satisfactory audio quality. Emerging broadband IP networks such as LANs, WANs
and the Internet, or emerging last mile technologies such as cable, DSL and wireless local loop will not be used for telephony unless such
networks and technologies can provide reliability and quality consistent with these standards.
The Company believes that the market acceptance of telephony over broadband IP networks is dependent upon the adoption of industry
standards so that products from multiple manufacturers are able to communicate with each other. Broadband telephony products rely heavily on
standards such as H.323, SGCP, MGCP, and H.GCP to interoperate with other vendors' equipment. There is currently a lack of agreement
among industry leaders about which standard should be used for a particular application, and about the definition of the standards themselves.
Furthermore, the industry has had difficulty achieving true multivendor interoperability for highly complex standards such as H.323. Standards
are continuously being modified and replaced. As standards evolve, the Company may be required to modify its existing products or develop
and support new versions of its products. The failure of the Company's products to comply, or delays in compliance, with various existing and
evolving industry standards could delay or interrupt volume production of the Company's Broadband Telephony products, which would have a
material adverse effect on the Company's business and operating results.
The Company must comply with certain rules and regulations of the Federal Communications Commission regarding electromagnetic radiation
and safety standards established by Underwriters Laboratories as well as similar regulations and standards applicable in other countries. The
failure of the Company's products to comply, or delays in compliance, with the various existing and evolving government regulations could
delay or interrupt volume production of its Broadband Telephony or Video Monitoring products, which could have a material adverse effect on
the Company's business and operating results.
TRANSITION TO SMALLER GEOMETRY PROCESS TECHNOLOGIES AND HIGHER LEVELS OF DESIGN INTEGRATION
The Company continuously evaluates the benefits, on an integrated circuit, product-by-product basis, of migrating to smaller geometry process
technologies in order to reduce costs and has commenced migration of certain future products to smaller geometry processes. The Company
believes that the transition of its products to increasingly smaller geometries will be important for the Company to remain competitive. The
Company has in the past experienced difficulty in migrating to new manufacturing processes, which has resulted and could continue to result in
reduced yields, delays in product deliveries and increased expense levels. Moreover, the Company is dependent on its relationships with its
foundries and their partners to migrate to smaller geometry processes successfully. No assurance can be given that the Company's future
process migrations will be achieved or achieved without difficulties, delays or increased expenses, or at all. The Company's business, financial
condition and results of operations could be materially and adversely affected if any such transition is substantially delayed or inefficiently
implemented. As smaller geometry processes become more prevalent, the Company expects to integrate greater levels of functionality as well
as customer
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