3Ware 2002 Annual Report Download - page 24

semiconductor companies may seek to develop and introduce products that integrate the functions performed by
our IC products on a single chip, thus eliminating the need for our products. Each of these factors could have a
material adverse effect on our business, financial condition and results of operations.
In the communications markets, we compete primarily against companies such as Agere, Broadcom,
Conexant, Infineon, Intel, Maxim, Multilink, PMC-Sierra, TriQuint and Vitesse. In addition, certain of our
customers or potential customers have internal IC design or manufacturing capability with which we compete.
Any failure by us to compete successfully in these target markets, particularly in the communications markets,
would have a material adverse effect on our business, financial condition and results of operations.
Revenues that are currently derived from non-communications markets have been declining and we
expect them to continue to decline in future periods.
We have derived significant revenues from product sales to customers in the ATE, high-speed computing
and military markets and currently anticipate that we will continue to derive revenues from sales to customers in
these markets in the near term. We are not currently developing products for these markets, and have initiated a
plan to exit these markets entirely. The plan includes closing the facility where a majority of these products are
manufactured, as well as coordinating a last time buy program with our customers in these markets.
Our future success depends in part on the continued service of our key design engineering, sales,
marketing, manufacturing and executive personnel and our ability to identify, hire and retain additional,
qualified personnel.
There is intense competition for qualified personnel in the semiconductor industry, in particular design,
product and test engineers, and we may not be able to continue to attract and train engineers or other qualified
personnel necessary for the development of our business, or to replace engineers or other qualified personnel who
may leave our employment in the future. Periods of contraction in our business may inhibit our ability to attract
and retain our personnel. Loss of the services of, or failure to recruit, key design engineers or other technical and
management personnel could be significantly detrimental to our product and process development programs.
In May 2002, we completed a stock option exchange program. The sole purpose of the program was to
improve our ability to retain and motivate employees, officers and board members. We cannot be certain that the
program will result in increased retention of employees, officers or board members.
To manage operations effectively, we will be required to continue to improve our operational, financial and
management systems and to successfully hire, train, motivate and manage our employees. The integration of past
and future potential acquisitions will require significant additional management, technical and administrative
resources. We cannot be certain that we will be able to manage our expanded operations effectively.
A disruption in the manufacturing capabilities of our outside foundries would negatively impact the
production of certain of our products.
We rely on outside foundries for the manufacture of the majority of our products, including all of our
products designed on CMOS and SiGe processes. These outside foundries generally manufacture our products on
a purchase order basis. A majority of our products are only qualified for production at a single foundry. These
suppliers can allocate, and in the past have allocated, capacity to the production of other companies’ products
while reducing deliveries to us on a short notice. Because establishing relationships and ramping production with
new outside foundries may take over a year, there is no readily available alternative source of supply for these
products. A manufacturing disruption experienced by one or more of our outside foundries or a disruption of our
relationship with an outside foundry, including discontinuance of our products by that foundry, would negatively
impact the production of certain of our products for a substantial period of time. The transition to the next
generation of manufacturing technologies at one or more of our outside foundries could be unsuccessful or
delayed.
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