SanDisk 2012 Annual Report Download - page 134

• incurring non-recurring charges, increased contingent liabilities, adverse tax consequences,
depreciation or deferred compensation charges, amortization of intangible assets or impairment of
goodwill, which could harm our results of operations; and
• potential delay in customer purchasing decisions due to uncertainty about the direction of our product
offerings or those of the acquired business.
Our success depends on our key personnel, including our senior management, and the loss of key personnel
or the transition of key personnel could disrupt our business. Our success greatly depends on the continued
contributions of our senior management and other key research and development, sales, marketing and operations
personnel. We do not have employment agreements with any of our executive officers and they are free to
terminate their employment with us at any time. Our success will depend on our ability to recruit and retain
additional highly-skilled personnel. We have relied on equity awards in the form of stock options and restricted
stock units as one means for recruiting and retaining highly skilled talent and a reduction in our stock price may
reduce the effectiveness of these equity awards in retaining employees. We also rely on cash incentive awards to
motivate and retain employees. These cash incentive awards depend significantly on our financial and business
performance, and variations in our financial and business performance from our expectations at the time we set
the targets for such cash incentive awards could result in decreased or eliminated awards, reducing the
effectiveness of these cash incentive awards in retaining employees.
Terrorist attacks, war, threats of war and government responses thereto may negatively impact our
operations, revenues, costs and stock price. Terrorist attacks, U.S. military responses to these attacks, war,
threats of war and any corresponding decline in consumer confidence could have a negative impact on consumer
demand. Any of these events may disrupt our operations or those of our customers and suppliers and may affect
the availability of materials needed to manufacture our products or the means to transport those materials to
manufacturing facilities and finished products to customers. Any of these events could also increase volatility in
the U.S. 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, and a
research center in Omer, Israel, which is near the Gaza Strip, areas that have experienced significant violence and
political unrest. Turmoil and unrest in Israel, the Middle East or other regions could cause delays in the
development or production of our products and could harm our business and operating results.
Natural disasters or epidemics in the countries in which we or our suppliers or subcontractors operate
could harm our operations. Our supply chain operations, including those of our suppliers and subcontractors, are
concentrated in the United States, Japan, Taiwan, China and Singapore. In the past, certain of these areas have
been affected by natural disasters such as earthquakes, tsunamis, floods and typhoons, and some areas have been
affected by epidemics. In addition, our headquarters, which house a significant concentration of our research and
development and engineering staff, are located in the San Francisco Bay Area, an area that is prone to
earthquakes. If a natural disaster or epidemic were to occur in one or more of these areas, we could incur a
significant work or production stoppage. The impact of these potential events is magnified by the fact that we do
not have insurance for most natural disasters, including earthquakes and tsunamis. The impact of a natural
disaster could harm our business and operating results.
Disruptions in global transportation could impair our ability to deliver or receive product on a timely basis,
or at all, causing harm to our financial results. Our raw materials, work-in-process and finished products are
primarily distributed via air transport. If there are significant disruptions in air transport, we may not be able to
deliver our products or receive raw materials. Any natural disaster that affects air transport in Asia could disrupt
our ability to receive raw materials in, or ship finished product from, our Shanghai, China facility or our Asia-
based contract manufacturers. As a result, our business and operating results may be harmed.
We rely on information systems to run our business and any prolonged down time could harm our business
operations and/or financial results. We rely on an enterprise resource planning system, as well as multiple other
systems, databases, and data centers to operate and manage our business. Any information system problems,
28