3Ware 2003 Annual Report Download - page 39

may ultimately prove unsuccessful. If we are not successful in introducing such advances, we will be unable to
timely bring to market new products and our revenues will suffer.
Products for communications applications are based on industry standards that are continually evolving. Our
ability to compete in the future will depend on our ability to identify and ensure compliance with these evolving
industry standards. The emergence of new industry standards could render our products incompatible with
products developed by major systems manufacturers. As a result, we could be required to invest significant time
and effort and to incur significant expense to redesign our products to ensure compliance with relevant standards.
If our products are not in compliance with prevailing industry standards for a significant period of time, we could
miss opportunities to achieve crucial design wins. If we fail to do so, we may not achieve design wins with key
customers or may subsequently lose such design wins, and our business will significantly suffer because once a
customer has designed a supplier’s product into its system, the customer typically is extremely reluctant to
change its supply source due to significant costs associated with qualifying a new supplier.
The markets in which we compete are highly competitive and subject to rapid technological change, price
erosion and heightened competition.
The communications IC markets are highly competitive and we expect that competition will increase in
these markets, due in part to deregulation and heightened international competition. Our ability to compete
successfully in our markets depends on a number of factors, including:
• success in designing and subcontracting the manufacture of new products that implement new
technologies;
• product quality, reliability and performance;
• customer support;
• time-to-market;
• price;
• production efficiency;
• design wins;
• expansion of production of our products for particular systems manufacturers;
• end-user acceptance of the systems manufacturers’ products;
• market acceptance of competitors’ products; and
• general economic conditions.
Our competitors may offer enhancements to existing products, or offer new products based on new
technologies, industry standards or customer requirements, that are available to customers on a more timely basis
than comparable products from us or that have the potential to replace or provide lower cost alternatives to our
products. The introduction of such enhancements or new products by our competitors could render our existing
and future products obsolete or unmarketable. Furthermore, once a customer has designed a supplier’s product
into its system, the customer is unlikely to change its supply source due to the significant costs associated with
qualifying a new supplier. Finally, we expect that certain of our competitors and other 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, Intel,
Mindspeed, PMC-Sierra, and Vitesse. 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
34