Adaptec 2003 Annual Report Download - page 41

We must often redesign our products to meet evolving industry standards and customer specifications, which may prevent or delay
future revenue growth.
We sell products to a market whose characteristics include evolving industry standards, short product lifespans, and new
manufacturing and design technologies. Many of the standards and protocols for our products are based on high−speed networking
technologies that have not been widely adopted or ratified by one or more of the standard−setting bodies in our customers’ industry.
Our customers often delay or alter their design demands during this standard−setting process. In response, we must redesign our
products to suit these changing demands. Redesign usually delays the production of our products. Our products may become obsolete
during these delays.
Since many of the products we develop do not reach full production sales volumes for a number of years, we may incorrectly
anticipate market demand and develop products that achieve little or no market acceptance.
Our products generally take between 12 and 24 months from initial conceptualization to development of a viable prototype, and
another 3 to 18 months to be designed into our customers’ equipment and into production. Our products often must be redesigned
because manufacturing yields on prototypes are unacceptable or customers redefine their products to meet changing industry standards
or customer specifications. As a result, we develop products many years before volume production and may inaccurately anticipate
our customers’ needs.
Our strategy includes broadening our business into the Enterprise, Storage and Consumer markets. We may not be successful in
achieving significant sales in these new markets.
The Enterprise, Storage and Consumer markets are already serviced by incumbent suppliers who have established relationships with
customers. We may be unsuccessful in displacing these suppliers, or having our products designed into products for different market
needs. In order to compete against incumbents, we may need to lower our prices to win new business, which could lower our gross
margin. We may incur increased research, development and sales costs to address these new markets.
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 in Canadian dollars, and our selling costs are incurred in a variety of currencies around the world. The US dollar has and
may continue to devalue compared to the Canadian dollar. To protect against reductions in value and the volatility of future cash
flows caused by changes in foreign exchange rates, we enter into foreign currency forward contracts. The contracts reduce, but do not
eliminate, the impact of foreign currency exchange rate movements. In addition, this foreign currency risk management policy may
not be effective in addressing long−term fluctuations since our contracts do not extend beyond a 12−month maturity.
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
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