iRobot 2014 Annual Report Download - page 88

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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 defects, errors or performance problems when
first introduced, when new versions or enhancements are released, or even after these products have been used by our
customers for a period of time. These problems could result in expensive and time-consuming design modifications or warranty
charges, delays in the introduction of new products or enhancements, significant increases in our service and maintenance
costs, exposure to liability for damages, mandatory or voluntary recall or product upgrades, damaged customer relationships
and harm to our reputation, any of which could materially harm our results of operations and ability to achieve market
acceptance. Our quality control procedures relating to the raw materials and components that it receives from third-party
suppliers as well as our quality control procedures relating to its products after those products are designed, manufactured and
packaged may not be sufficient. In addition, increased development and warranty costs, including the costs of any mandatory or
voluntary recall, could be substantial and could reduce our operating margins. Moreover, because military robots are used in
dangerous situations, the failure or malfunction of any of these robots, including our own, could significantly damage our
reputation and support for robot solutions in general. The existence of any defects, errors, or failures in our products could also
lead to product liability claims or lawsuits against us. A successful product liability claim could result in substantial cost,
diminish our brand and divert management’s attention and resources, which could have a negative impact on our business,
financial condition and results of operations.
If we are unable to attract and retain additional skilled personnel, we may be unable to grow our business.
To execute our growth plan, we must attract and retain additional, highly-qualified personnel. Competition for hiring
these employees is intense, especially with regard to engineers with high levels of experience in designing, developing and
integrating robots. Many of the companies with which we compete for hiring experienced employees have greater resources
than we have. If we fail to attract new technical personnel or fail to retain and motivate our current employees, our business and
future growth prospects could be severely harmed.
We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-
consuming and limit our ability to use certain technologies in the future.
If the size of our markets increases, we would be more likely to be subject to claims that our technologies infringe upon
the intellectual property or other proprietary rights of third parties. In addition, the vendors from which we license technology
used in our products could become subject to similar infringement claims. Our vendors, or we, may not be able to withstand
third-party infringement claims. Any claims, with or without merit, could be time-consuming and expensive, and could divert
our management’s attention away from the execution of our business plan. Moreover, any settlement or adverse judgment
resulting from the claim could require us to pay substantial amounts or obtain a license to continue to use the technology that is
the subject of the claim, or otherwise restrict or prohibit our use of the technology. There can be no assurance that we would be
able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that we would be
able to develop alternative technology on a timely basis, if at all, or that we would be able to obtain a license to use a suitable