Audiovox 2003 Annual Report Download - page 19

Cautionary Factors That May Affect Future Results
We have identified certain risk factors that apply to either Audiovox as a
whole or one of our specific business units. You should carefully consider each
of the following risk factors and all of the other information included or
incorporated by reference in this Form 10−K. If any of these risks, or other
risks not presently known to us or that we currently believe not to be
significant, develop into actual events, then our business, financial condition,
liquidity, or results of operations could be materially adversely affected. If
that happens, the market price of our common stock would likely decline, and you
may lose all or part of your investment.
We May Not Be Able to Compete Successfully in the Highly Competitive Wireless
Industry.
The market for wireless handsets and accessories is highly competitive and
is characterized by:
o intense price competition
o shorter product life cycles
o significant price erosion over the life of a product
o inventory write−downs
o industry consolidation
o rapid technological development
o the demand by wireless carriers for value−added services provided by
their suppliers
Our primary competitors for wireless handsets currently are Motorola, LG,
Nokia, Kyocera and Samsung. In addition, we compete with numerous other
established and new manufacturers and distributors, some of whom sell the same
or similar products directly to our customers. Historically, our competitors
have also included some of our own suppliers and customers. Many of our
competitors offer more extensive advertising and promotional programs than we
do.
During the last decade, there have been several periods of extreme price
competition, particularly when one or more or our competitors has sought to sell
off excess inventory by lowering its prices significantly. In particular, when
technologies changed in 2000 from analog to digital, several of our larger
competitors lowered their prices significantly to reduce their inventories,
which required us to similarly reduce our prices. These price reductions had a
material adverse effect on our profitability. There can be no assurance that our
competitors will not do this again, because, among other reasons, many of them
have significantly greater financial resources than we do and can withstand
substantial price competition. Since we sell products that tend to have low
gross profit−margins, price competition has had, and may in the future have, a
material adverse effect on our financial performance.
The Electronics Business Is Highly Competitive; Our Electronics Business Also
Faces Significant Competition from Original Equipment Manufacturers (OEMs).
The market for electronics is highly competitive across all three of our
product lines. We compete against many established companies who have
substantially greater resources than us. In addition, we compete directly with
OEMs, including divisions of well−known automobile manufacturers, in the
autosound, auto security, mobile video and accessories industry. Most of these
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