3Ware 2004 Annual Report Download - page 60

•difficulty in completing an acquired company’s in-process research or development projects;
•amortization of acquired intangible assets and deferred compensation;
•customer dissatisfaction or performance problems with an acquired company’s products or services;
•costs associated with acquisitions or mergers;
•difficulties associated with the integration of acquired companies, products or technologies;
•difficulties competing in markets that are unfamiliar to us;
•ability of the acquired companies to meet their financial projections; and
•assumption of unknown liabilities, or other unanticipated events or circumstances.
Any of these risks could materially harm our business, financial condition and results of operations.
As with past acquisitions, future acquisitions could adversely affect operating results. In particular,
acquisitions may materially and adversely affect our results of operations because they may require large one-
time charges or could result in increased debt or contingent liabilities, adverse tax consequences, substantial
additional depreciation or deferred compensation charges. Our past purchase acquisitions required us to
capitalize significant amounts of goodwill and purchased intangible assets. As a result of the slowdown in our
industry and reduction of our market capitalization, we have been required to record various significant
impairment charges against these assets as noted in our financial statements. At March 31, 2004, we have 240.2
million of goodwill and purchased intangible assets. There can be no assurance that we will not be required to
take additional significant charges as a result of an impairment to the carrying value of these assets, due to further
declines in market conditions.
We have been named as a defendant in securities class action litigation that could result in substantial
costs and divert management’s attention and resources.
Our chief executive officer, current and former chief financial officer and certain of our other executive
officers and directors, have been sued for alleged violations of federal securities laws related to alleged
misrepresentations regarding our financial prospects for the fourth quarter of fiscal 2001. In addition, JNI
Corporation, which we acquired in October 2003, also has a number of pending lawsuits. We believe that the
claims being brought against us, including the claims pending against JNI Corporation and our officers and
directors, are without merit, and we intend to engage in a vigorous defense against such claims. If we are not
successful in our defense against such claims, we could be forced to make significant payments to the plaintiffs
and their lawyers, and such payments could have a material adverse effect on our business, financial condition
and results of operations if not covered by our insurance carriers. Even if such claims are not successful, the
litigation could result in substantial costs including, but not limited to, attorney and expert fees, and divert
management’s attention and resources, which could have an adverse effect on our business.
We may not be able to protect our intellectual property adequately.
We rely in part on patents to protect our intellectual property. We cannot assure you that our pending patent
applications or any future applications will be approved, or that any issued patents will adequately protect the
intellectual property in our products, 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. Others may 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 the 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. Despite these efforts, we cannot be certain
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