8x8 2000 Annual Report Download - page 22

- the level of international sales;
- continued compliance with industry standards; and
- general economic conditions.
Our gross margin is affected by a number of factors including, product mix, the recognition of license and other revenues for which there may
be no or little corresponding cost of revenues, product pricing, the allocation between international and domestic sales, the percentage of direct
sales and sales to resellers, and manufacturing and component costs. The markets for our products are characterized by falling average selling
prices. We expect that, as a result of competitive pressures and other factors, gross profit as a percentage of revenue for our semiconductor
products will likely decrease for the foreseeable future. The market for IP telephony semiconductors is likely to be a high volume market
characterized by commodity pricing. We will not be able to generate average selling prices or gross margins for our IP telephony
semiconductors similar to those that we have historically commanded for our videoconferencing semiconductors. In addition, the gross margins
for our Media Hub systems products are, and will likely continue to be, substantially lower than the gross margins for our videoconferencing
semiconductors. In the likely event that we encounter significant price competition in the markets for our products, we could be at a significant
disadvantage compared to our competitors, many of which have substantially greater resources, and therefore may be better able to withstand
an extended period of downward pricing pressure.
Variations in timing of sales may cause significant fluctuations in future operating results. In addition, because a significant portion of our
business may be derived from orders placed by a limited number of large customers, including OEM customers, the timing of such orders can
also cause significant fluctuations in our operating results. Anticipated orders from customers may fail to materialize. Delivery schedules may
be deferred or canceled for a number of reasons, including changes in specific customer requirements or international economic conditions.
The adverse impact of a shortfall in our revenues may be magnified by our inability to adjust spending to compensate for such shortfall.
Announcements by us or our competitors of new products and technologies could cause customers to defer purchases of our existing products,
which would also have a material adverse effect on our business and operating results.
As a result of these and other factors, it is likely that in some or all future periods our operating results will be below the expectations of
securities analysts or investors, which would likely result in a significant reduction in the market price of our common stock.
WE MAY NOT BE ABLE TO MANAGE OUR INVENTORY LEVELS EFFECTIVELY WHICH MAY LEAD TO INVENTORY
OBSOLESCENCE WHICH WOULD FORCE US TO LOWER OUR PRICES
Our products have lead times of up to several months, and are built to forecasts that are necessarily imprecise. Because of our practice of
building our products to necessarily imprecise forecasts, it is likely that, from time to time, we will have either excess or insufficient product
inventory. Excess inventory levels would subject us to the risk of inventory obsolescence and the risk that our selling prices may drop below
our inventory costs, while insufficient levels of inventory may negatively affect relations with customers. Any of these factors could have a
material adverse effect on our operating results and business.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO SUPPORT OUR GROWTH, AND FAILURE TO DO SO IN A TIMELY
MANNER MAY CAUSE US TO DELAY OUR PLANS FOR GROWTH
As of March 31, 2000, we had approximately $48.6 million in cash and cash equivalents. We believe that we will be able to fund planned
expenditures and satisfy our cash requirements for at least the next twelve months from existing cash balances. However, we may seek to
explore business opportunities, including acquiring or investing in complementary businesses or products, that will require additional capital
from equity or debt sources. Additionally, the development and marketing of new products could require a significant commitment of
resources, which could in turn require us to obtain additional financing earlier than otherwise expected. We may not be able to obtain additional
financing as needed on acceptable terms, or at all, which would force us to delay our plans for growth and implementation of our strategy
which could seriously harm
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