Adaptec 2001 Annual Report Download - page 46

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discontinue using certain processes or obtain licenses to the infringing technology. In addition,
we may not be able to develop non-infringing technology, nor might we be able to find
appropriate licenses on reasonable terms.
Patent disputes in the semiconductor industry are often settled through cross-licensing
arrangements. Because we currently do not have a substantial portfolio of patents compared to
our larger competitors, we may not be able to settle an alleged patent infringement claim
through a cross-licensing arrangement. We are therefore more exposed to third party claims
than some of our larger competitors and customers.
In the past, our customers have been required to obtain licenses from and pay royalties to third
parties for the sale of systems incorporating our semiconductor devices. Customers may also
make claims against us with respect to infringement.
Furthermore, w e may initiate claims or litigation against third parties for infringing our
proprietary rights or to establish the validity of our proprietary rights. This could consume
significant resources and divert the efforts of our technical and management personnel,
regardless of the litigation’s outcome.
We have signi ficantly increased our leverage as a result of the sal e of convertible notes.
On August 6, 2001, w e raised $275 million through the issuance of convertible subordinated
notes. As a result, our interest payment obligations have increased substantially. The degree to
which we are leveraged could materially and adversely affect our ability to obtain financing for
working capital, acquisitions or other purposes and could make us more vulnerable to industry
dow nturns and competitive pressures. Our ability to meet our debt service obligations will be
dependent upon our future performance, which will be subject to financial, business and other
factors affecting our operations, many of which are beyond our control. On August 15, 2006,
we are obliged to repay the full remaining principal amount of the notes that have not been
converted into our common stock.
Securi ties we issue to fund our operations could dil ute your ownership.
We may decide to raise additional funds through public or private debt or equity financing to
fund our operations. If we raise funds by issuing equity securities, the percentage ownership of
current stockholders will be reduced and the new equity securities may have priority rights to
your investment. We may not obtain sufficient financing on terms that are favorable to you or
us. We may delay, limit or eliminate some or all of our proposed operations if adequate funds
are not available.
Our stock pri ce has been and may conti nue to be vol atile.
In the past, our common stock price has fluctuated significantly. In particular, our stock price
declined significantly in the context of announcements made by us and other semiconductor
suppliers of reduced revenue expectations and of a general slowdown in the markets we serve.