Adaptec 2006 Annual Report Download - page 24

Table of Contents
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 sold in production quantities. 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.
We may have to redesign our products to meet evolving industry standards and customer specifications, which may prevent or delay future revenue
growth.
We sell products to customers 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 networking technologies that may not have been widely adopted or ratified by
one or more of the standard-setting bodies in our customers’ industries. Our customers may delay or alter their design demands during this standard-setting
process. In response, we must redesign our products to suit these changing demands. Redesign is expensive and usually delays the production of our products.
Our products may become obsolete during these delays.
Our strategy includes broadening our business into the Enterprise, Storage and Consumer markets. We may not be successful in achieving significant
sales in these 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. These markets typically are characterized by stronger price competition and, consequently, lower per unit profit margins. If we are successful
in these markets, our overall profit margins could decline, as lower margin products may comprise a greater portion of our revenues.
We are subject to the risks of conducting business outside the United States, which may impair our sales, development or manufacturing of our
products.
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.
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠