iRobot 2005 Annual Report Download - page 30

ties, economic conditions or otherwise, to decrease its purchases from us, to reduce the shelf space for our
products or to change its manner of doing business with us could significantly damage our consumer product
sales and negatively impact our business, financial condition and results of operations. In addition, during
recent years, various retailers, including some of our distributors, have experienced significant changes and
difficulties, including consolidation of ownership, increased centralization of purchasing decisions, restructur-
ings, bankruptcies and liquidations. These and other financial problems of some of our retailers increase the
risk of extending credit to these retailers. A significant adverse change in a retail distributor relationship with
us or in a retail distributor's financial position could cause us to limit or discontinue business with that
distributor, require us to assume more credit risk relating to that distributor's receivables or limit our ability to
collect amounts related to previous purchases by that distributor, all of which could harm our business and
financial condition. Disruption of the iRobot on-line store could also decrease our consumer robot sales.
If we fail to enhance our brand, our ability to expand our customer base will be impaired and our
operating results may suffer.
We believe that developing and maintaining awareness of the iRobot brand is critical to achieving
widespread acceptance of our existing and future products and is an important element in attracting new
customers. Furthermore, we expect the importance of global brand recognition to increase as competition
develops. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts,
including our mass media outreach, in-store training and presentations and public relations, and our ability to
provide customers with reliable and technically sophisticated robots at competitive prices. If customers do not
perceive our products to be of high quality, our brand and reputation could be harmed, which could adversely
impact our financial results. In addition, brand promotion efforts may not yield significant revenue or
increased revenue sufficient to offset the additional expenses incurred in building our brand. If we incur
substantial expenses to promote and maintain our brand, we may fail to attract sufficient customers to realize
a return on our brand-building efforts, and our business would suffer.
If our existing collaborations are unsuccessful or we fail to establish new collaborations, our ability to
develop and commercialize additional products could be significantly harmed.
If we cannot maintain our existing collaborations or establish new collaborations, we may not be able to
develop additional products. We anticipate that some of our future products will be developed and
commercialized in collaboration with companies that have expertise outside the robot field. For example, we
are currently collaborating with Deere & Company on the development of the R-Gator unmanned ground
vehicle, and The Clorox Company on the cleaning solution used in our Scooba floor washing robot. Under
these collaborations, we may be dependent on our collaborators to fund some portion of development of the
product or to manufacture and market either the primary product that is developed pursuant to the
collaboration or complementary products required in order to operate our products. In addition, we cannot
assure you that we will be able to establish additional collaborative relationships on acceptable terms.
Our existing collaborations and any future collaborations with third parties may not be scientifically or
commercially successful. Factors that may affect the success of our collaborations include the following:
‚ our collaborators may not devote the resources necessary or may otherwise be unable to complete
development and commercialization of these potential products;
‚ our existing collaborations are and future collaborations may be subject to termination on short notice;
‚ our collaborators may be pursuing alternative technologies or developing alternative products, either on
their own or in collaboration with others, that may be competitive with our products, which could affect
our collaborators' commitment to the collaboration with us;
‚ reductions in marketing or sales efforts or a discontinuation of marketing or sales of our products by our
collaborators could reduce our revenue;
‚ our collaborators may terminate their collaborations with us, which could make it difficult for us to
attract new collaborators or harm our reputation in the business and financial communities; and
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