Adaptec 2002 Annual Report Download - page 38

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Acquiring products, technologies or businesses from third parties is part of our business strategy.
Management may be diverted from our operations while they identify and negotiate these acquisitions and
integrate an acquired entity into our operations. Also, we may be forced to develop expertise outside our
existing businesses, and replace key personnel who leave due to an acquisition.
An acquisition could absorb substantial cash resources, require us to incur or assume debt obligations, or
issue additional equity. If we issue more equity, we may dilute our common stock with securities that have
an equal or a senior interest.
Acquired entities also may have unknown liabilities, and the combined entity may
not achieve the results that were anticipated at the time of the acquisition.
The timing of revenues from newly designed products is often uncertain. In the past, we have had to redesign
products that we acquired when buying other businesses, resulting in increased expenses and delayed
revenues. This may occur in the future as we commercialize the new products resulting from acquisitions.
We participate in funds that invest in early−stage private technology companies to gain access to emerging
technologies. These companies possess unproven technologies and our investments may or may not yield
positive returns. We currently have commitments to invest $38.1 million in such funds. In addition to
consuming significant amounts of cash, these investments are risky because the technologies that these
companies are developing may not reach commercialization. We may record an impairment charge to our
operating results should we determine that these funds have incurred a non−temporary decline in value.
The loss of personnel could preclude us from designing new products.
To succeed, we must retain and hire technical personnel highly skilled at the design and test functions
needed to develop high−speed networking products and related software. The competition for such employees is
intense.
We do not have employment agreements in place with many of our key personnel. As employee incentives, we
issue common stock options that generally have exercise prices at the market value at the time of grant and
that are subject to vesting. Recently, our stock price has declined substantially. The stock options we
grant to employees are effective as retention incentives only if they have economic value.
Our recent restructurings have significantly reduced the number of our technical employees. We may
experience customer dissatisfaction as a result of delayed or cancelled product development initiatives.
We may not be able to meet customer demand for our products if we do not accurately predict demand or if we
fail to secure adequate wafer fabrication or assembly capacity.
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