Adaptec 2003 Annual Report Download - page 44

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.
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 an additional $19.2 million in such funds. As well as 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. 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. As our stock price
varies substantially, the stock options we grant to employees are effective as retention incentives only if they have economic value.
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 parts and capacity.
We currently do not have the ability to accurately predict what products our customers will need in the future. Anticipating demand is
difficult because our customers face volatile pricing and demand for their end−user networking equipment, our customers are focusing
more on cash preservation and tighter inventory management, and because we supply a large number of products to a variety of
customers and contract manufacturers who have many equipment programs for which they purchase our products. Our customers are
frequently requesting shipment of our products earlier than our normal lead times. If we do not accurately predict what mix of
products our customers may order, we may not be able to meet our customers’ demand in a timely manner or we may be left with
unwanted inventory.
A shortage in supply could adversely impact our ability to satisfy customer demand, which could adversely affect our customer
relationships along with our current and future operating results.
We rely on limited sources of wafer fabrication, the loss of which could delay and limit our product shipments.
We do not own or operate a wafer fabrication facility. Three outside foundries supply greater than 95% of our semiconductor device
requirements. Our foundry suppliers also produce products for themselves and other companies and thus we may not have access to
adequate capacity or certain process technologies. We have less control over delivery schedules,
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