Adaptec 2002 Annual Report Download - page 37

We are exposed to the credit risk of some of our customers and we may have
difficulty collecting receivables from customers based in foreign countries.
Many of our customers employ contract manufacturers to produce their products and manage their inventories.
Many of these contract manufacturers represent greater credit risk than our networking equipment customers,
who generally do not guarantee our credit receivables related to their contract manufacturers.
In addition, international debt rating agencies have significantly downgraded the bond ratings on a number
of our larger customers, which had traditionally been considered financially stable. Should these companies
enter into bankruptcy proceedings or breach their debt covenants, our significant accounts receivables with
these companies could be jeopardized.
The complexity of our products could result in unforeseen delays or expenses and in undetected defects or
bugs, which could adversely affect the market acceptance of new products and damage our reputation with
current or prospective customers.
Although we, or our customers and our suppliers rigorously test our products, our highly complex products
regularly contain defects or bugs. We have in the past experienced, and may in the future experience, these
defects and bugs. If any of our products contain defects or bugs, or have reliability, quality or
compatibility problems that are significant to our customers, our reputation may be damaged and customers
may be reluctant to buy our products. This could materially and adversely affect our ability to retain
existing customers or attract new customers. In addition, these defects or bugs could interrupt or delay
sales to our customers.
We may have to invest significant capital and other resources to alleviate problems with our products. If
any of these problems are not found until after we have commenced commercial production of a new product, we
may be required to incur additional development costs and product recall, repair or replacement costs. These
problems may also result in claims against us by our customers or others. In addition, these problems may
divert our technical and other resources from other development efforts. Moreover, we would likely lose, or
experience a delay in, market acceptance of the affected product or products, and we could lose credibility
with our current and prospective customers.
We may be unsuccessful in transitioning the design of our new products to new
manufacturing processes.
Many of our new products are designed to take advantage of new manufacturing processes offering smaller
manufacturing geometries as they become available, as the smaller geometry products can provide a product
with improved features such as lower power requirements, more functionality and lower cost. We believe that
the transition of our products to smaller geometries is critical for us to remain competitive. We could
experience difficulties in migrating to future geometries or manufacturing processes, which would result in
the delay of the production of our products. Our products may become obsolete during these delays, or allow
competitors' parts to be chosen by customers during the design process.
Our business strategy contemplates acquisition of other companies or
technologies, which could adversely affect our operating performance.
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