8x8 2005 Annual Report Download - page 28

25
FACTORS THAT MAY AFFECT FUTURE RESULTS
Before you invest in our common stock, you should become aware of various risks, including those described below.
You should carefully consider these risk factors, together with all of the other information included in this
prospectus, including the documents incorporated in this prospectus by reference, before you decide whether to
purchase the securities. The risks set out below may not be exhaustive.
We have a history of losses and we are uncertain as to our future profitability.
We recorded an operating loss of approximately $19.9 million for the year ended March 31, 2005, and we ended the
period with an accumulated deficit of $171 million. In addition, we recorded operating losses of $4 million and $12
million for the fiscal years ended March 31, 2004 and 2003, respectively. We expect that we will continue to incur
operating losses for the foreseeable future, and such losses may be substantial. We will need to generate significant
revenue growth to achieve an operating profit. Given our history of fluctuating revenues and operating losses, we
cannot be certain that we will be able to achieve profitability on either a quarterly or annual basis in the future.
Our stock price has been highly volatile.
The market price of the shares of our common stock has been and is likely to be highly volatile. It may be
significantly affected by factors such as:
• actual or anticipated fluctuations in our operating results;
• announcements of technical innovations;
• future legislation or regulation of the Internet and/or voice over Internet protocol (VoIP);
• loss of key personnel;
• new entrants into the VOIP service marketplace, including cable companies and other well-capitalized
competitors;
• new products or new contracts by us, our competitors or their customers; and
• developments with respect to patents or proprietary rights, general market conditions, changes in financial
estimates by securities analysts, and other factors which could be unrelated to, or outside of, our control.
The stock market has from time to time experienced significant price and volume fluctuations that have particularly
affected the market prices for the common stocks of technology companies and that have often been unrelated to the
operating performance of particular companies. These broad market fluctuations may adversely affect the market
price of our common stock. In the past, following periods of volatility in the market price of a company's securities,
securities class action litigation has often been initiated against the issuing company. If our stock price is volatile,
we may also be subject to such litigation. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which would disrupt business and could cause a decline in our operating
results. Any settlement or adverse determination in such litigation would also subject us to significant liability.
The growth of our business and our potential for future profitability depends on the growth of Packet8
revenue.
We devote substantially all of our resources to the promotion, distribution and development of our Packet8 service.
As such, our future growth and profitability is dependent on revenue from our Packet8 service, as opposed to
revenue from our semiconductor business, which has historically accounted for a substantial portion of the
Company's consolidated revenues.
Semiconductor and related software revenues represented approximately 83% and 88%, respectively, of the
Company's consolidated revenues for fiscal 2004 and 2003. However, these revenues were not sufficient to
profitably operate our semiconductor business. Therefore, we have significantly reduced the scope of these
operations. During the quarter ended June 30, 2003, we completed the end-of-life of our legacy videoconferencing
semiconductor products. In November 2003, we sold the VIP1 video semiconductor development effort to Leadtek
Research, Inc. (Leadtek). Under the terms of the transaction, Leadtek acquired the VIP1 development activities, key