SanDisk 2014 Annual Report Download - page 94

technology transitions. Other factors that could result in volatility in our product gross margin include
fluctuations in customer mix, as well as variations in the technologies or form factors of our products. For
example, we experienced negative product gross margin for fiscal year 2008 and the first quarter of fiscal
year 2009 due to sustained aggressive industry price declines as well as inventory charges, due primarily to
lower of cost or market write-downs. If we fail to maintain adequate product gross margin and profitability,
our business and financial condition would be harmed and we may have to reduce, curtail or terminate
certain business activities, including funding technology development and capacity expansion.
Furthermore, as we diversify the products that we sell, changes in our product mix could result in volatility
in our product gross margin, since we have significant variation in our product gross margin across product
lines, and some of the products that we sell have product gross margin that is significantly below our
overall average.
We may not be able to realize the potential financial or strategic benefits of business acquisitions or
strategic investments, which could harm our ability to grow our business, develop new products or sell our
products. We have in the past and may in the future enter into acquisitions of, or investments in, businesses
in order to complement or expand our current business or enter into new markets. Mergers and
acquisitions of high-technology companies are inherently risky and subject to many factors outside of our
control and no assurance can be given that our previous or future acquisitions will be successful, deliver the
intended benefits and not materially harm our business, operating results or financial condition.
Furthermore, negotiation and integration of acquisitions or strategic investments could divert
management’s attention and other company resources.
Factors associated with past or future acquisitions or investments that could harm our growth
prospects or results of operations include but are not limited to:
• difficulty in integrating the technology, products, operations or workforce of the acquired business
into our business;
• failure to transition an acquired business from third-party sources of NAND flash memory to our
captive supply of these materials, not having enough captive NAND flash memory to support the
revenue growth of the acquired business or inability to procure sufficient NAND flash memory
from third-party sources in a cost effective manner, or at all, which could harm our ability to achieve
the expected benefits from the acquisition;
• failure to leverage the cost benefits of using our captive assembly and test or manufacturing
facilities for the operations of an acquired business, which could harm our ability to achieve the
expected benefits from the acquisition;
• difficulty in entering into new markets in which we have limited or no experience, such as software
solutions, and where competitors have stronger positions;
• failure of the markets addressed by the acquired business to grow as expected;
• loss of, or the impairment of or failure to maintain and grow relationships with, key employees,
suppliers, vendors or customers of the acquired business, including any on which the acquired
business is significantly reliant;
• difficulty in integrating the technology of the acquired business into our product lines in existence
or in development, which could harm our ability to maintain the business after the acquisition or
diminish our expected benefits of the acquisition;
• difficulty in operating in new and potentially dispersed locations;
• disruption of our ongoing business or the ongoing business of the company we invest in or acquire;
• failure to realize the potential financial or strategic benefits of the transaction, including but not
limited to any expected cost savings or synergies from the acquisition;
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