TiVo 2008 Annual Report Download - page 32

Table of Contents
previously impaired inventory during the fiscal year ended January 31, 2009. If we were to over estimate demand for our DVRs, we may end up with
inventories that exceed currently forecasted demand which would require us to record additional write-downs. Should actual market conditions differ from the
Company's estimates, the Company's future results of operations could be materially affected. In the future, we may be required to record additional write-
downs of finished products and materials on-hand and/or additional charges for excess purchase commitments as a result of future changes in our sales
forecasts.
We have limited experience and face significant competition in providing service and operations internationally that are subject to different
competitors, laws, regulations, and requirements than those in the United States and our inability to compete or comply with such laws, regulations,
and requirements could harm our reputation, brand, and have a negative impact on revenues.
We have provided and expect to continue to provide the TiVo service in jurisdictions outside of the United States, including the United Kingdom,
Mexico, Canada, Australia and in the future New Zealand. We have limited experience in international operations. We face significant competition and
technological challenges in competing with other consumer electronics manufacturers in these jurisdictions and in complying with international laws and
technological standards such the various digital over-the-air standards like DVB-T. If we are unable to properly manage our international operations or
comply with international laws, regulations, and requirements, we could suffer damage to our reputation, brand, and revenues and as a result our business
could be harmed. We have and expect to continue to partner with local broadcasters, cable television operators, and satellite providers to provide the TiVo
service internationally. Transactions with international partners may never materialize or may not result in significant revenue for us and may result in
significant costs.
We face significant risks to our business when we engage in the outsourcing of engineering work which, if not properly managed, could result
in the loss of valuable intellectual property which could harm our business.
We have from time-to-time outsourced engineering work related to the design, development, and manufacturing of our products. We have and expect to
in the future work with companies located in jurisdictions outside of the United States, including, but not limited to, China, India, Ukraine, and Mexico. We
have limited experience in the outsourcing of engineering, manufacturing and other work to third parties located internationally that operate under different
laws and regulations than those in the United States. If we are unable to properly manage and oversee the outsourcing of this engineering, manufacturing and
other work related to our products, we could suffer the loss of valuable intellectual property, including patents, trademarks, trade secrets, and copyrights and
as a result our business could be harmed.
Product defects, system failures, or interruptions to the TiVo service may have a negative impact on our revenues, damage our reputation and
decrease our ability to attract new customers.
Our ability to provide uninterrupted service and high quality customer support depends on the efficient and uninterrupted operation of our computer and
communications systems. Our computer hardware and other operating systems for the TiVo service are vulnerable to damage or interruption from
earthquakes, floods, fires, power loss, telecommunication failures and similar events. They are also subject to break-ins, sabotage, intentional acts of
vandalism and similar misconduct. These types of interruptions in the TiVo service may reduce our revenues and profits. We currently house the server
hardware that delivers the TiVo service at only one location and continue to explore the benefits of establishing a backup facility. Our business also will be
harmed if consumers believe our service is unreliable. In addition to placing increased burdens on our engineering staff, service outages will create a flood of
customer questions and complaints that must be responded to by our customer support personnel. Any frequent or persistent system failures could irreparably
damage our reputation and brand and possibly trigger requests for refunds on subscription fees and hardware purchases and possible consumer litigation.
We have detected in the past and may continue to detect errors and product defects in the future. These problems can affect system uptime and result in
significant warranty and repair problems, which could cause customer service and customer relations problems. Correcting errors in our software or fixing
defects in our products requires significant time and resources, which could delay product releases and affect market acceptance of the TiVo service. Any
delivery by us of products or upgrades with undetected material product defects or software errors could harm our credibility and market acceptance of the
DVRs and the TiVo service. In addition, defective products could cause a risk of injury that may subject us to litigation or cause us to have to undertake a
product recall. For example, we previously became aware of occasions where a part came loose from the remote control device that comes with the DVRs that
enable the TiVo service, including occurrences where a young child gagged on or ingested a part of the remote control device. While we are unaware of any
injuries resulting from the use of our products, we may be subject to products liability litigation in the future. Additionally, if we are required to repair or
replace any of our products, we could incur significant costs, which would have a negative impact on our financial condition and results of operations.
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