8x8 2000 Annual Report Download - page 25

SGCP, MGCP, and H.GCP to interoperate with other vendors' equipment. There is currently a lack of agreement among industry leaders about
which standard should be used for a particular application, and about the definition of the standards themselves. Furthermore, the industry has
had difficulty achieving true multivendor interoperability for highly complex standards such as H.323. We also must comply with certain rules
and regulations of the Federal Communications Commission regarding electromagnetic radiation and safety standards established by
Underwriters Laboratories as well as similar regulations and standards applicable in other countries. Standards are continuously being modified
and replaced. As standards evolve, we may be required to modify our existing products or develop and support new versions of our products.
The failure of our products to comply, or delays in compliance, with various existing and evolving industry standards could delay or interrupt
volume production of our IP telephony products, which would have a material adverse effect on our business and operating results.
FUTURE REGULATION OR LEGISLATION COULD RESTRICT OUR BUSINESS OR INCREASE OUR COST OF DOING
BUSINESS
At present there are few laws or regulations that specifically address access to or commerce on the Internet, including IP telephony. We are
unable to predict the impact, if any, that future legislation, legal decisions or regulations concerning the Internet may have on our business,
financial condition and results of operations. Regulation may be targeted towards, among other things, assessing access or settlement charges,
imposing tariffs or imposing regulations based on encryption concerns or the characteristics and quality of products and services, which could
restrict our business or increase our cost of doing business. The increasing growth of the broadband IP telephony market and popularity of
broadband IP telephony products and services heighten the risk that governments will seek to regulate broadband IP telephony and the Internet.
In addition, large, established telecommunications companies may devote substantial lobbying efforts to influence the regulation of the
broadband IP telephony market, which may be contrary to our interests.
WE MAY TRANSITION TO SMALLER GEOMETRY PROCESS TECHNOLOGIES AND HIGHER LEVELS OF DESIGN
INTEGRATION WHICH COULD DISRUPT OUR BUSINESS
We continuously evaluate the benefits, on an integrated circuit, product-by-product basis, of migrating to smaller geometry process
technologies in order to reduce costs. We have commenced migration of certain future products to smaller geometry processes. We believe that
the transition of our products to increasingly smaller geometries will be important for us to remain competitive. We have in the past
experienced difficulty in migrating to new manufacturing processes, which has resulted and could continue to result in reduced yields, delays in
product deliveries and increased expense levels. Moreover, we are dependent on relationships with our foundries and their partners to migrate
to smaller geometry processes successfully. If any such transition is substantially delayed or inefficiently implemented we may experience
delays in product introductions and incur increased expenses. As smaller geometry processes become more prevalent, we expect to integrate
greater levels of functionality as well as customer and third-party intellectual property into our products. Some of this intellectual property
includes analog components for which we have little or no experience or in-house expertise. We cannot predict whether higher levels of design
integration or the use of third-
party intellectual property will adversely affect our ability to deliver new integrated products on a timely basis, or
at all.
OUR ANNOUNCED ACQUISITION OF UFORCE, INC. AND ANY FUTURE ACQUISITIONS MAY BE DIFFICULT TO INTEGRATE,
DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE OR DIVERT MANAGEMENT ATTENTION
We announced our intention to acquire UForce on May 19, 2000. Completion of the transaction is subject to certain closing conditions. To the
extent that we are successful in closing the transaction, there are risks associated with the assimilation and integration of UForce, including:
- unanticipated problems and costs associated with combining the businesses and integrating UForce's products and technologies;
- impact of integration efforts on management's attention to our core business;
- adverse effects on existing business relationships with suppliers and customers;
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