Adaptec 2002 Annual Report Download - page 40

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We are subject to the risks of conducting business outside the United States to a greater extent than
companies that operate their businesses mostly in the United States, which may impair our sales, development
or manufacturing of our products.
We are subject to the risks of conducting business outside the United States to a greater extent than most
companies because, in addition to selling our products in a number of countries, a significant portion of
our research and development and manufacturing is conducted outside the United States.
The geographic diversity of our business operations could hinder our ability to coordinate design and sales
activities. If we are unable to develop systems and communication processes to support our geographic
diversity, we may suffer product development delays or strained customer relationships.
We may lose our ability to design or produce products, could face
additional unforeseen costs or could lose access to key customers if
any of the nations in which we conduct business impose trade barriers
or new communications standards.
We may have difficulty obtaining export licenses for certain technology produced for us outside the United
States. If a foreign country imposes new taxes, tariffs, quotas, and other trade barriers and restrictions
or the United States and a foreign country develop hostilities or change diplomatic and trade relationships,
we may not be able to continue manufacturing or sub−assembly of our products in that country and may have
fewer sales in that country. We may also have fewer sales in a country that imposes new communications
standards or technologies. This could inhibit our ability to meet our customers' demand for our products and
lower our revenues.
If foreign exchange rates fluctuate significantly, our profitability
may decline.
We are exposed to foreign currency rate fluctuations because a significant part of our development, test,
marketing and administrative costs are denominated in Canadian dollars, and our selling costs are
denominated in a variety of currencies around the world. While we have adopted a foreign currency risk
management policy, which is intended to reduce the effects of short−term fluctuations, our policy may not be
effective and it does not address long−term fluctuations.
In addition, while all of our sales are denominated in US dollars, our customers' products are sold
worldwide. Any further decline in the world networking markets could seriously depress our customers' order
levels for our products. This effect could be exacerbated if fluctuations in currency exchange rates
decrease the demand for our customers' products.
From time to time, we become defendants in legal proceedings about which we are unable to assess our
exposure and which could become significant liabilities upon judgment.
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