SanDisk 2007 Annual Report Download - page 71

increase volatility in the United States and world financial markets, which could harm our stock price and may limit
the capital resources available to us and our customers or suppliers, or adversely affect consumer confidence. We
have substantial operations in Israel including a development center in Northern Israel, near the border with
Lebanon, areas that have recently experienced significant violence and political unrest. Tower, which supplies a
significant portion of our controller wafers, is also located in Israel. Continued turmoil and unrest in Israel or the
Middle East could cause delays in the development or production of our products. This could harm our business and
results of operations.
Natural disasters or epidemics in the countries in which we or our suppliers or subcontractors operate could
negatively impact our operations. Our operations, including those of our suppliers and subcontractors, are
concentrated in Milpitas, California; Yokkaichi, Japan; Hsinchu and Taichung, Taiwan; and Dongguan, Shanghai
and Shenzen, China. In the past, these areas have been affected by natural disasters such as earthquakes, tsunamis,
floods and typhoons, and some areas have been affected by epidemics, such as avian flu. If a natural disaster or
epidemic were to occur in one or more of these areas, our operations could be significantly impaired and our
business may be harmed. This is magnified by the fact that we do not have insurance for most natural disasters,
including earthquakes. This could harm our business and results of operations.
To manage our growth, we may need to improve our systems, controls, processes and procedures. We have
experienced and may continue to experience rapid growth, which has placed, and could continue to place a
significant strain on our managerial, financial and operations resources and personnel. Our business and number
of employees have increased significantly over the last several years. We must continually enhance our operational,
accounting and financial systems to accommodate the growth and increasing complexity of our business. For
example, we have recently decided to replace our enterprise resource planning, or ERP, system. This project will
require significant investment, the re-engineering of many processes used to run our business, and the attention of
many employees and managers who would otherwise be focused on other aspects of our business. The design and
implementation of the new ERP system could also take longer than anticipated and put further strain on our ability
to run our business on the older, existing ERP system. Any design flaws or delays in the new ERP system or any
distraction of our workforce from competing business requirements could harm our business or results of
operations. We must also continue to enhance our controls and procedures and workforce training. If we do
not manage our growth effectively or adapt our systems, processes and procedures to our growing business and
organization, our business and results of operations could be harmed.
We may need to raise additional financing, which could be difficult to obtain, and which if not obtained in
satisfactory amounts may prevent us from funding flash ventures with Toshiba or other third parties, increasing our
wafer supply, developing or enhancing our products, taking advantage of future opportunities, growing our
business or responding to competitive pressures or unanticipated industry changes, any of which could harm our
business. We currently believe that we have sufficient cash resources to fund our operations as well as our
anticipated investments in ventures with third parties for at least the next twelve months; however, we may in the
future raise additional funds, including funds to meet our obligations with respect to Flash Partners and Flash
Alliance, or with respect to the potential new memory wafer fab, and we cannot be certain that we will be able to
obtain additional financing on favorable terms, if at all. From time-to-time, we may decide to raise additional funds
through public or private debt, equity or lease financings. If we issue additional equity securities, our stockholders
will experience dilution and the new equity securities may have rights, preferences or privileges senior to those of
existing holders of common stock. If we raise funds through debt or lease financing, we will have to pay interest and
may be subject to restrictive covenants, which could harm our business. If our corporate rating is significantly
downgraded by any rating agency, it may impair the ability of our flash ventures with Toshiba to obtain future
equipment lease financings on terms consistent with current leases and would cause a default under certain current
leases, either of which could harm our business and financial condition. If we cannot raise funds on acceptable
terms, if and when needed, we may not be able to develop or enhance our products, fulfill our obligations to Flash
Partners and Flash Alliance, take advantage of future opportunities, grow our business or respond to competitive
pressures or unanticipated industry changes, any of which could have a negative impact on our business.
Anti-takeover provisions in our charter documents, stockholder rights plan and in Delaware law could
discourage or delay a change in control and, as a result, negatively impact our stockholders. We have taken a
number of actions that could have the effect of discouraging a takeover attempt. For example, we have a
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