Memorex 2010 Annual Report Download - page 12

Item 1A. Risk Factors.
Our business faces many risks. Any of the risks discussed below, or elsewhere in this Form 10-K or our other SEC
filings, could have a material impact on our business, financial condition or results of operations.
We must make strategic decisions from time to time as to the products and technologies in which we invest
and if we choose the wrong product or technology, our financial results could be adversely impacted. On
February 1, 2011, we announced our strategic direction as a technology company focused on growth opportunities in data
storage, protection and connectivity. Growth opportunities will be achieved through corporate strategies, product strategies
and investment strategies. These strategies require significant investment. If we are not successful in implementing these
strategies or if we choose the wrong focus for our strategies, our financial results could be negatively impacted.
The future revenue growth of our business depends in part on the development and performance of our new
products. Historically, magnetic and optical products have provided the majority of our revenues. Demand for optical
media products is decreasing due to a shift in demand to the use of other media for storing data. While demand for data
capacity is expected to increase, removable magnetic media market size is expected to decrease in terms of revenue. We
expect new product revenue growth to eventually offset the product revenue declines of our products in mature markets so
that our total company revenue will grow. If we are not successful in growing new product revenues, our financial results
could be negatively impacted.
Our results of operations include our determinations of the amount of taxes owed in the various tax
jurisdictions in which we operate and are subject to changes in tax laws and regulations, and to inspection by
various tax authorities. Changes in related interpretations and other tax guidance as well as inspections by tax
authorities could materially impact our tax receivables and liabilities and our deferred tax assets and deferred tax liabilities.
Additionally, in the ordinary course of business we are subject to examinations by tax authorities in multiple jurisdictions. In
addition to ongoing investigations, there could be additional investigations launched in the future by governmental
authorities in various jurisdictions and existing investigations could be expanded. While we believe we have adopted
appropriate risk management and compliance programs to address and reduce these risks, the global and diverse nature
of our operations means that these risks will continue to exist and additional issues will arise from time to time. Our results
may be affected by the outcome of such proceedings and other contingencies that cannot be predicted with certainty.
Because of the rapid technology changes in our industry, we may not be able to compete if we cannot
quickly develop, source, introduce and deliver differentiating and innovative products. We operate in a highly
competitive environment against competitors who are both larger and smaller than us in terms of resources and market
share. Our industry is characterized by rapid technological change and new product introductions. In these highly
competitive and changing markets, our success will depend, to a significant extent, on our ability to continue to develop
and introduce differentiated and innovative products and services cost-effectively and on a timely basis. The success of
our offerings is dependent on several factors including our differentiation from competitive offerings, timing of new product
introductions, effectiveness of marketing programs and maintaining low manufacturing, sourcing and supply chain costs. No
assurance can be given with regard to our ability to anticipate and react to changes in market requirements, actions of
competitors or the pace and direction of technology changes.
We may be dependent on third parties for new product introductions or technologies in order to introduce
our own new products. We are dependent in some cases upon various third parties, such as certain drive
manufacturers, for the introduction and acceptance of new products, the timing of which is out of our control. In addition,
there can be no assurance that we will maintain existing relationships or forge new OEM relationships. There can also be
no assurance that we will continue to have access to significant proprietary technologies through internal development and
licensing arrangements with third parties, or that we will continue to have access to new competitive technologies that may
be required to introduce new products. If we are not successful in maintaining and developing new relationships with
OEMs or obtaining rights to use competitive technologies, we may become less competitive in certain markets.
Negative or uncertain global economic conditions could result in a decrease in our sales and revenue and
an increase in our operating costs, which could adversely affect our business and operating results. Negative or
uncertain global economic conditions could cause many of our direct and indirect customers to delay or reduce their
purchases of our products. Further, many of our customers in OEM, distribution and retail channels rely on credit financing
in order to purchase our products. Additionally, some of our suppliers pay us quarterly or annual rebates based on the
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