DIRECTV 2010 Annual Report Download - page 43

DIRECTV
We cannot estimate the extent to which we may be required in the future to any satellite would materially adversely affect the use of the satellite and thus could
obtain intellectual property licenses or the availability and cost of any such licenses. materially adversely affect our anticipated revenues and earnings. If satellite
Those costs, and their impact on our earnings, could be material. Damages in construction schedules are not met, there can be no assurance that a launch
patent infringement cases may also include treble damages in certain circumstances. opportunity will be available at the time a satellite is ready to be launched. Certain
To the extent that we are required to pay royalties to third parties to whom we are delays in satellite construction could also jeopardize a satellite authorization that is
not currently making payments, these increased costs of doing business could conditioned on timely construction and launch of the satellite.
materially adversely affect our operating results. We are currently being sued in
patent infringement actions related to use of technologies in our DTH business. Our satellites are subject to significant launch and operational risks.
There can be no assurance that the courts will conclude that our services or the Satellites are subject to significant operational risks relating to launch and
products used to transmit or receive our services do not infringe on the rights of while in orbit. Launch and operational risks include launch failure, incorrect orbital
third parties, that we or the manufacturers would be able to obtain licenses from placement or improper commercial operation. Launch failures result in significant
these persons on commercially reasonable terms or, if we were unable to obtain delays in the deployment of satellites because of the need both to construct
such licenses, that we or the manufacturers would be able to redesign our services replacement satellites, which can take up to 36 months, and obtain other launch
or the products used to transmit or receive our services to avoid infringement. The opportunities. We estimate the overall historical loss rate for all launches of
final disposition of these claims is not expected to have a material adverse effect on commercial satellites in the last seven years to be approximately five percent but it
our consolidated financial position, but could possibly be material to our may be higher. Any significant delays or failures in successfully launching and
consolidated results of operations for any one period. Further, no assurance can be deploying our satellites could materially adversely affect our ability to generate
given that any adverse outcome would not be material to our consolidated financial revenues. While we have traditionally purchased insurance covering the launch and,
position. See ‘‘Legal Proceedings—Intellectual Property Litigation’’ in Part I, Item 3 in limited cases, operation of our satellites, such policies typically cover the loss of
which is incorporated by reference herein. the satellite itself or a portion thereof, and not the business interruption or other
associated direct and indirect costs. For example, we purchased launch insurance
We rely on key personnel. covering a portion of our DIRECTV 12 satellite, which we launched at the end of
We believe that our future success will depend to a significant extent upon the 2009, and launch vehicle costs in the event of a total loss of the satellite prior to
performance of certain of our key executives. The loss of certain of our key separation from the launch vehicle, but did not purchase in-orbit insurance for it.
executives could have a material adverse effect on our business, financial condition In-orbit risks include malfunctions, commonly referred to as anomalies, and
and results of operations. collisions with meteoroids, other spacecraft or other space debris. Anomalies occur
as a result of various factors, such as satellite manufacturing errors, problems with
Construction or launch delays on satellites could materially adversely affect our the power systems or control systems of the satellites and general failures resulting
revenues and earnings. from operating satellites in the harsh space environment. We work closely with our
A key component of our business strategy is our ability to expand our offering satellite manufacturers to determine and eliminate the potential causes of anomalies
of new programming and services, including increased local and HD programming. in new satellites and provide for redundancies of critical components in the
In order to accomplish this goal, we need to construct and launch new satellites. satellites as well as having backup satellite capacity. However, we cannot assure you
The construction and launch of satellites are often subject to delays, including that we will not experience anomalies in the future, nor can we assure you that our
satellite and launch vehicle construction delays, periodic unavailability of reliable backup satellite capacity will be sufficient for our business purposes.
launch opportunities due to competition for launch slots, weather and also due to Any single anomaly or series of anomalies could materially adversely affect our
general delays that result when a launch provider experiences a launch failure, and operations and revenues and our relationships with our subscribers, as well as our
delays in obtaining regulatory approvals. A significant delay in the future delivery of
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