SanDisk 2010 Annual Report Download - page 156

have a comprehensive and highly developed legal system, particularly with respect to the protection of
intellectual property rights. This results, among other things, in the prevalence of counterfeit goods in China. The
enforcement of existing and future laws and contracts remains uncertain, and the implementation and
interpretation of such laws may be inconsistent. Such inconsistency could lead to piracy and degradation of our
intellectual property protection. Although we engage in efforts to prevent counterfeit products from entering the
market, those efforts may not be successful. Our results of operations and financial condition could be harmed by
the sale of counterfeit products. In addition, customs regulations in China are complex and subject to frequent
changes, and in the event of a customs compliance issue, our ability to import to and export from our factory in
Shanghai, China, could be adversely affected, which could harm our results of operations and financial condition.
Our international business activities could also be limited or disrupted by any of the following factors:
• the need to comply with foreign government regulation;
• changes in diplomatic and trade relationships;
• reduced sales to our customers or interruption to our manufacturing processes in the Pacific Rim that
may arise from regional issues in Asia, including labor strikes;
• imposition of regulatory requirements, tariffs, import and export restrictions and other barriers and
restrictions;
• changes in, or the particular application of, government regulations;
• import or export restrictions that could affect some of our products, including those with encryption
technology;
• duties and/or fees related to customs entries for our products, which are all manufactured offshore;
• longer payment cycles and greater difficulty in accounts receivable collection;
• adverse tax rules and regulations;
• weak protection of our intellectual property rights;
• delays in product shipments due to local customs restrictions; and
• delays in research and development that may arise from political unrest at our development centers in
Israel or other countries.
Our stock price and convertible notes prices have been, and may continue to be, volatile, which could result
in investors losing all or part of their investments. The market prices of our stock and convertible notes have
fluctuated significantly in the past and may continue to fluctuate in the future. We believe that such fluctuations
will continue as a result of many factors, including financing plans, future announcements concerning us, our
competitors or our principal customers regarding financial results or expectations, technological innovations,
industry supply or demand dynamics, new product introductions, governmental regulations, the commencement
or results of litigation or changes in earnings estimates by analysts. In addition, in recent years the stock market
has experienced significant price and volume fluctuations and the market prices of the securities of high-
technology and semiconductor companies have been especially volatile, often for reasons outside the control of
the particular companies. These fluctuations as well as general economic, political and market conditions may
have an adverse affect on the market price of our common stock as well as the prices of our outstanding
convertible notes.
We may engage in business combinations that are dilutive to existing stockholders, result in unanticipated
accounting charges or otherwise harm our results of operations, and result in difficulties in assimilating and
integrating the operations, personnel, technologies, products and information systems of acquired companies or
businesses. We continually evaluate and explore strategic opportunities as they arise, including business
combinations, strategic partnerships, collaborations, capital investments and the purchase, licensing or sale of
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