3Ware 2005 Annual Report Download - page 39

• the impact of potential one time charges related to purchased intangibles;
• costs associated with compliance with applicable environmental, other governmental or industry
regulations including costs to redesign products to comply with those regulations or lost revenue due to
failure to comply timely;
• the effects of changes in accounting standards, including the recently announced rule requiring the
recognition of expense related to employee stock options;
• the effects of changes in interest rates or credit worthiness on the value and yield of our short-term
investment portfolio;
• costs associated with litigation, including without limitation, attorney fees, litigation judgments or
settlements, relating to the use or ownership of intellectual property or other claims arising out of our
operations;
• the ability of our customers to obtain components from their other suppliers;
• our ability to identify, hire and retain senior management and other key personnel, including a
permanent Chief Financial Officer;
• the effects of war, acts of terrorism or global threats, such as disruptions in general economic activity
and changes in logistics and security arrangements; and
• general economic conditions.
Our business, financial condition and operating results would be harmed if we do not achieve anticipated
revenues.
We can have revenue shortfalls for a variety of reasons, including:
• a decrease in demand for our products or our customers’ products;
• a decline in the financial condition or liquidity of our customers or their customers;
• delays in the availability of our products or our customers’ products;
• the failure of our products to be qualified in our customers’ systems or certified by our customers;
• excess inventory of our products at our customers resulting in a reduction in their order patterns as they
work through the excess inventory of our products;
• fabrication, test, or product yield, assembly constraints for our devices, which adversely affect our
ability to meet our production obligations;
• the financial failure of one of our subcontract manufacturers;
• the reduction, rescheduling or cancellation of customer orders;
• declines in the average selling prices of our products;
• our failure to successfully integrate acquired companies, products and technologies; and
• shortages of raw materials or production capacity constraints that lead our suppliers to allocate available
supplies or capacity to customers with resources greater than us and, in turn, interrupt our ability to meet
our production obligations.
Our business is characterized by short-term orders and shipment schedules. Customer orders typically can
be cancelled or rescheduled without significant penalty to the customer. Because we do not have substantial
noncancellable backlog, we typically plan our production and inventory levels based on internal forecasts of
customer demand, which is highly unpredictable and can fluctuate substantially. Customer orders for our
products typically have non-standard lead times, which makes it difficult for us to predict revenues and plan
inventory levels and production schedules. If we are unable to plan inventory levels and production schedules
effectively, our business, financial condition and operating results could be materially harmed.
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