Adaptec 2001 Annual Report Download - page 36

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36
production requirements difficult and can lead to an inventory surplus of certain of their
components.
Our customers often shift buying patterns as they manage inventory levels, decide to use
competing products, are acquired or divested, market different products, or change production
schedules.
In addition, we believe that uncertainty in our customers’ end markets and our customers’
increased focus on cash management has caused our customers to delay product orders and
reduce delivery lead-time expectations. We expect this will increase the proportion of our
netw orking revenues in future periods that will be from orders placed and fulfilled within the
same period. This will decrease our ability to accurately forecast, and may lead to greater
fluctuations in, operating results.
We occasionally estimate the size and consumption of our customers’ inventories of our
products. These estimates are based on our limited survey of selected contract
manufacturers and our largest original equipment manufacturer, or OEM, customers.
Our analysis is intended only to provide us with some information about our market to
assist in our forecasts, which are limited by the precision of the data we obtain.
• Our surveys are not comprehensive. For instance, we do not include all contract
manufacturers or most of our other customers, so our overall estimates may be understated
and we cannot accurately forecast inventory consumption by these customers.
• We are unable to obtain accurate data from survey respondents about the degree to which
our products are included in their work in progress and finished goods inventories, so our
estimates of their inventories of our products may be understated.
• We do not verify or crosscheck the information we receive from the companies we survey.
• We obtain this information over extended periods and do not adjust the information for the
time at w hich a response was received.
While we intend to monitor contract manufacturer and large OEM customer inventories of our
products, we may not do this consistently and we may not provide updates of our expectations
resulting from new data we obtain.
Even if our survey proves accurate, our estimate of when these contract manufacturers and
large OEM customers will consume their inventory and return to purchasing products from us
may not be accurate for the following reasons:
• Contract manufacturers and OEMs who consume their inventories of our products may buy
units from our distributors’ existing inventories before they start buying additional units
from us. While we will recognize sales by our major distributor as revenue, those sales will
not result in additional cash flow.