3Ware 2005 Annual Report Download - page 45

The markets in which we compete are highly competitive, and we expect competition to increase in these
markets in the future.
The markets in which we compete are highly competitive, and we expect that domestic and international
competition will increase in these markets, due in part to deregulation, rapid technological advances, price
erosion, changing customer preferences and evolving industry standards. Increased competition could result in
significant price competition, reduced revenues, lower profit margins or loss of market share. 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, interoperability, reliability, performance and certification;
• 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. 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 IC 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 capabilities 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.
In the storage market, we primarily compete against companies such as Emulex, QLogic, Agilent
Technologies, Adaptec and LSI Logic. As a result of our acquisition of IBM’s 400 series of embedded
PowerPC®standard products in May 2004, our list of competitors has expanded to include large technology
companies such as Freescale Semiconductor and IBM. Many of these companies have substantially greater
financial, marketing and distribution resources than we have. Our RAID products compete against Adaptec and
LSI Logic, two much larger companies. We may also face competition from new entrants to the storage market,
including larger technology companies that may develop or acquire differentiating technology and then apply
their resources to our detriment. The storage market continues to mature and become commoditized. To the
extent that commoditization leads to significant pricing declines, whether initiated by us or by a competitor, we
will be required to increase our product volumes and reduce our costs of goods sold to avoid resulting pressure
on our profit margin for these products, and we cannot assure you that we will be successful in responding to
these competitive pricing pressures.
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