8x8 1999 Annual Report Download - page 24

RELIANCE ON GROWTH OF THE IP TELEPHONY MARKET
Success of the Company's Broadband Telephony product strategy assumes that there will be future demand for IP telephony systems. In order
for the IP telephony market to continue to grow, several things need to occur. Telephone service providers must continue to invest in the
deployment of high speed broadband networks to residential and commercial customers. IP networks must improve their QoS for real-time
communications, managing effects such as packet jitter, packet loss and unreliable bandwidth, so that toll-quality service can be provided. IP
telephony equipment must achieve the five-nines reliability that users of the PSTN have come to expect from their telephone service. IP
telephony service providers must offer cost and feature benefits to their customers that are sufficient to cause the customers to switch away
from traditional telephony service providers. There can be no assurance that any or all of these will occur and a failure of any or all of these to
occur may have a material adverse effect on the Company's business.
UNCERTAINTY OF MARKET ACCEPTANCE OF VIDEO MONITORING PRODUCTS
Due to bandwidth constraints, the Company's Video Monitoring products transmit video over a POTS line at a frame rate and resolution that
are significantly less than the frame rate and resolution of standard CCTV monitors. Furthermore, the Company's Video Monitoring products
transmit audio over a POTS line with a fidelity that is often less than toll quality and that degrades in the presence of background noise. The
POTS infrastructure varies widely in configuration and integrity, which can degrade, make unreliable or even eliminate the digital connections
between the Company's Video Monitoring products. The security industry demands a high degree of quality, robustness and reliability of its
products. Actual or perceived technical difficulties or insufficient video or audio quality could impede market acceptance and have a material
adverse effect on the Company's business and results of operations.
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCT INTRODUCTION
The IP telephony and video monitoring are emerging markets and are characterized by rapid changes in customer requirements, frequent
introductions of new and enhanced products, and continuing and rapid technological advancement. To compete successfully, the Company
must continue to design, develop, manufacture and sell new and enhanced products that provide increasingly higher levels of performance and
reliability and lower cost, take advantage of technological advancements and changes, and respond to new customer requirements. The
Company's success in designing, developing, manufacturing and selling such products will depend on a variety of factors, including the
identification of market demand for new products, product selection, timely implementation of product design and development, product
performance, cost- effectiveness of products under development, effective manufacturing processes and the success of promotional efforts.
The Company has in the past experienced delays in the development of new products and the enhancement of existing products, and such
delays will likely occur in the future.* If the Company is unable, due to resource constraints or technological or other reasons, to develop and
introduce new or enhanced products in a timely manner, if such new or enhanced products do not achieve sufficient market acceptance or if
such new product introductions decrease demand for existing products, it would have a material adverse effect on the Company's business and
operating results.
RELIANCE ON PARTNERSHIPS FOR BROADBAND TELEPHONY PRODUCTS
The Company is entering into new market areas and its success is partly dependent on its ability to forge new marketing and engineering
partnerships. IP telephony communications systems are extremely complex
* This statement is a forward looking statement reflecting current expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. See "Manufacturing" commencing on page 15, "Competition" commencing on
page 13 and "Factors That May Affect Future Results" commencing on page 17 for a discussion of certain factors that could affect future
performance.
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