3Ware 2003 Annual Report Download - page 12

needs in the future and so we are involved in the early stages of our customers plans to design new equipment.
We sell our products both directly and through a network of independent manufacturers’ representatives and
distributors. Our direct sales force is technically trained. Expert technical support is critical to our customers’
success and we provide such support through our field applications engineers, technical marketing team and
engineering staff, as well as through our extranet technical support web site.
We augment this strategic account sales approach with domestic and foreign distributors that service
primarily smaller accounts purchasing ASSPs. In North America, we have one primary distributor.
Internationally, we sell our products through manufacturers’ representatives and distributors. Typically, these
distributors handle a wide variety of products, including those that compete with our products, and fill orders for
many customers. Most of our sales to distributors are made under agreements allowing for price protection and
right of return on stipulated quantities of unsold merchandise. Our sales headquarters is located in San Diego,
California. We maintain sales offices throughout the world.
Backlog
Our sales are made primarily pursuant to standard purchase orders for the delivery of products. Quantities of
our products to be delivered and delivery schedules are frequently revised to reflect changes in customers’ needs;
customer orders generally can be cancelled or rescheduled without significant penalty to the customer. For these
reasons, our backlog as of any particular date is not representative of actual sales for any succeeding period, and
therefore, we believe that backlog is not necessarily a good indicator of future revenue.
Competition
In the communications IC markets, we compete primarily against companies such as Agere, Broadcom,
Intel, Mindspeed, PMC-Sierra, and Vitesse. In addition, certain of our customers or potential customers have
internal IC design or manufacturing capability with which we compete.
The communications IC markets are highly competitive and are subject to rapid technological change,
evolving standards, short product life cycles, and price erosion. We typically face competition at the design stage
when our customers are selecting which semiconductor components to use in their next generation equipment.
We believe that the principal factors of competition for the markets we serve include: product performance,
quality, reliability, integration, price, and time-to-market, as well as the Company’s reputation and level of
customer support. Our ability to successfully compete in these markets depends on our ability to design and
subcontract the manufacture of new products that implement new technologies and gain end market acceptance
in a time efficient and cost effective manner.
Proprietary Rights
We rely in part on patents to protect our intellectual property. We have been issued 90 patents, which
principally cover certain aspects of the design and architecture of our IC products. In addition, we have over 200
inventions in various stages of the patenting process in the United States and abroad. There can be no assurance
that our pending patent applications or any future applications will be approved, or that any issued patents will
provide us with competitive advantages or will not be challenged by third parties or that if challenged, will be
found to be valid or enforceable, or that the patents of others will not have an adverse effect on our ability to do
business. There can be no assurance that others will not independently develop similar products or processes,
duplicate our products or processes or design around any patents that may be issued to us.
To protect our intellectual property, we also rely on a combination of mask work protection under the
Federal Semiconductor Chip Protection Act of 1984, trademarks, copyrights, trade secret laws, employee and
third-party nondisclosure agreements and licensing arrangements.
7