iRobot 2011 Annual Report Download - page 65

We face intense competition from other providers of robots, including diversified technology providers, as
well as competition from providers offering alternative products, which could negatively impact our results
of operations and cause our market share to decline.
We believe that a number of companies have developed or are developing robots that will compete directly
with our product offerings. Additionally, large and small companies, government-sponsored laboratories and
universities are aggressively pursuing contracts for robot-focused research and development. Many current and
potential competitors have substantially greater financial, marketing, research and manufacturing resources than
we possess, and there can be no assurance that our current and future competitors will not be more successful
than us. Moreover, while we believe many of our customers purchase our floor vacuuming robots as a
supplement to, rather than a replacement for, their traditional vacuum cleaners; we also compete in some cases
with providers of traditional vacuum cleaners. Our competitors include developers of robot floor cleaning
products, developers of small unmanned ground vehicles, established government contractors working on
unmanned systems, and developers of small unmanned underwater vehicles.
The market for robots is highly competitive, rapidly evolving and subject to changing technologies, shifting
customer needs and expectations and the likely increased introduction of new products. Our ability to remain
competitive will depend to a great extent upon our ongoing performance in the areas of product development and
customer support.
In the event that the robot market expands, we expect that competition will intensify as additional
competitors enter the market and current competitors expand their product lines. Companies competing with us
may introduce products that are competitively priced, have increased performance or functionality, or incorporate
technological advances that we have not yet developed or implemented. Increased competitive pressure could
result in a loss of sales or market share or cause us to lower prices for our products, any of which would harm our
business and operating results.
We cannot assure you that our products will continue to compete favorably or that we will be successful in
the face of increasing competition from new products and enhancements introduced by existing competitors or
new companies entering the markets in which we provide products. Our failure to compete successfully could
cause our revenue and market share to decline, which would negatively impact our results of operations and
financial condition.
If critical components of our products that we currently purchase from a small number of suppliers become
unavailable, we may incur delays in shipment, which could damage our business.
We and our outsourced manufacturers obtain hardware components, various subsystems, raw materials and
batteries from a limited group of suppliers, some of which are sole suppliers. We do not have any long-term
agreements with these suppliers obligating them to continue to sell components or products to us. If we or our
outsourced manufacturers are unable to obtain components from third-party suppliers in the quantities and of the
quality that we require, on a timely basis and at acceptable prices, we may not be able to deliver our products on
a timely or cost-effective basis to our customers, which could cause customers to terminate their contracts with
us, reduce our gross margin and seriously harm our business, results of operations and financial condition.
Moreover, if any of our suppliers become financially unstable, we may have to find new suppliers. It may take
several months to locate alternative suppliers, if required, or to re-tool our products to accommodate components
from different suppliers. We may experience significant delays in manufacturing and shipping our products to
customers and incur additional development, manufacturing and other costs to establish alternative sources of
supply if we lose any of these sources. We cannot predict if we will be able to obtain replacement components
within the time frames that we require at an affordable cost, or at all.
Our products are complex and could have unknown defects or errors, which may give rise to claims against
us, diminish our brand or divert our resources from other purposes.
Our robots rely on the interplay among behavior-based artificially intelligent systems, real-world dynamic
sensors, user-friendly interfaces and tightly-integrated, electromechanical designs to accomplish their missions.
Despite testing, our new or existing products have contained defects and errors and may in the future contain
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