Adaptec 2003 Annual Report Download - page 37

filings, and some may be present in the future. You should carefully consider all of these risks and the other information in this report
before investing in PMC. The fact that certain risks are endemic to the industry does not lessen the significance of the risk.
As a result of these risks, our business, financial condition or operating results may be materially adversely affected. This could cause
the trading price of our securities to decline, and you may lose part or all of your investment.
We are subject to rapid changes in demand for our products due to customer inventory levels, production schedules, fluctuations in
demand for networking equipment and our customer concentration.
We have very limited revenue visibility.
Our ability to project revenues is limited because a significant portion of our revenues in a quarter derives from orders placed and
shipped in the same quarter, which we call our “turns business.” Our turns business varies widely quarter to quarter. Customers often
request short lead times between order and shipment, which can reduce our visibility. Accordingly we do not project revenues beyond
the current quarter, and our projection depends largely on our estimated turns business for the quarter.
Recent improvements in our revenues may not continue in 2004.
Our revenues largely depend on end−user demand for networking equipment, particularly demand by telecommunications service
providers, as our OEM customers have increasingly manufactured their products only when they have firm orders to fulfill. Many of
our customers have forecast only modest growth in 2004. While some of our customers have reported that demand for some of their
products has improved, demand may fluctuate from current levels depending on their customers’ specific needs. Many service
providers have limited capital expenditure budgets, and purchase only equipment that can generate rapid financial returns. Many
platforms in which our products are designed have been cancelled as our customers cancel or restructure product development
initiatives. Further growth of our revenues may be delayed or adversely impacted if these conditions continue or worsen.
Our customers’ actions have reduced our visibility of future revenue streams. As most of our costs are fixed in the short term, a further
reduction in demand for our products may cause a decline in our sales and gross margins.
We may fail to meet our demand forecasts if our customers cancel or delay the purchase of our products.
Many of our customers have numerous product lines, numerous component requirements for each product, sizeable and complex
supplier structures, and often engage contract manufacturers for additional manufacturing capacity. This makes forecasting their
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
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