Garmin 2009 Annual Report Download - page 47

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tograntusalicenseordemandcommerciallyunreasonableterms.Wemightnothavesufficientresourcestopay
forthelicenses.Suchinfringementclaimscouldalsocauseustoincursubstantialliabilitiesandtosuspendor
permanentlyceasetheuseofcriticaltechnologiesorprocessesortheproductionorsaleofmajorproducts.
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Wemaybecomesubjecttosignificantproductliabilitycosts.
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Ifouraviationproductsmalfunctionorcontainerrorsordefects,airplanecollisionsorcrashescouldoccur
resultinginpropertydamage,personalinjuryordeath.Malfunctionsorerrorsordefectsinourmarine
navigationalproductscouldcauseboatstorunagroundorcauseotherwreckage,personalinjuryordeath.Ifour
automotiveormarineproductscontaindefectsorerrorsinthemappingsuppliedbythird‐partymapprovidersor
ifourusersdonotheedourwarningsabouttheproperuseoftheseproducts,collisionsoraccidentscouldoccur
resultinginpropertydamage,personalinjuryordeath.Ifanyoftheseeventsoccurs,wecouldbesubjectto
significantliabilityforpersonalinjuryandpropertydamageandundercertaincircumstancescouldbesubjecttoa
judgmentforpunitivedamages.Wemaintaininsuranceagainstaccident‐relatedrisksinvolvingourproducts.
However,therecanbenoassurancethatsuchinsurancewouldbesufficienttocoverthecostofdamagesto
othersorthatsuchinsurancewillcontinuetobeavailableatcommerciallyreasonablerates.Inaddition,insurance
coveragegenerallywillnotcoverawardsofpunitivedamagesandmaynotcoverthecostofassociatedlegalfees
anddefensecosts,whichcouldresultinlowermargins.Ifweareunabletomaintainsufficientinsurancetocover
productliabilitycostsorifourinsurancecoveragedoesnotcovertheaward,thiscouldhaveamateriallyadverse
impactonourbusiness,financialconditionandresultsofoperations.
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Wedependonoursuppliers,someofwhicharethesolesourceforspecificcomponents,andourproduction
wouldbeseriouslyharmedifthesesuppliersarenotabletomeetourdemandandalternativesourcesarenot
available,orifthecostsofcomponentsrise.
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Wearedependentonthirdpartysuppliersforvariouscomponentsusedinourcurrentproducts.Someof
thecomponentsthatweprocurefromthirdpartysuppliersincludesemiconductorsandelectroluminescent
panels,liquidcrystaldisplays,memorychips,batteriesandmicroprocessors.Thecost,qualityandavailabilityof
componentsareessentialtothesuccessfulproductionandsaleofourproducts.Somecomponentsweuseare
fromsolesourcesuppliers.Certainapplication‐specificintegratedcircuitsincorporatingourproprietarydesignsare
manufacturedforusbysolesourcesuppliers.Alternativesourcesmaynotbecurrentlyavailableforthesesole
sourcecomponents.
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Inthepastwehaveexperiencedshortagesofliquidcrystaldisplaysandothercomponents.Inaddition,if
thereareshortagesinsupplyofcomponents,thecostsofsuchcomponentsmayrise.Ifsuppliersareunableto
meetourdemandforcomponentsonatimelybasisandifweareunabletoobtainanalternativesourceorifthe
priceofthealternativesourceisprohibitive,orifthecostsofcomponentsrise,ourabilitytomaintaintimelyand
cost‐effectiveproductionofourproductswouldbeseriouslyharmed.
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Wedependonthirdpartylicensorsforthedigitalmapdatacontainedinourautomotive/mobileproducts,and
ourbusinessand/orgrossmarginscouldbeharmedifwebecomeunabletocontinuelicensingsuchmapping
dataoriftheroyaltycostsforsuchdatarise.
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Welicensedigitalmappingdataforuseinourproductsfromvarioussources.Thereareonlyalimited
numberofsuppliersofmappingdataforeachgeographicalregion.Thetwolargestdigitalmapsuppliersare
NAVTEQCorporationandTeleAtlasN.V.NAVTEQCorporationisownedbyNokiaOyjandTeleAtlasN.V.isowned
byTomTomN.V.NokiaandTomTomarebothcompetitorsofGarmin.
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Althoughwedonotforeseedifficultyincontinuingtolicensedataatfavorablepricingduetothelong
termlicenseextensionsignedbetweenGarminandNAVTEQinNovember2007(extendingourNAVTEQlicense
agreementthrough2015withanoptiontoextendthrough2019),ifweareunabletocontinuelicensingsuch
mappingdataandareunabletoobtainanalternativesource,orifthenatureofourrelationshipswithNAVTEQ
changesdetrimentally,ourabilitytosupplymappingdataforuseinourproductswouldbeseriouslyharmed.