8x8 2000 Annual Report Download - page 26

- risks associated with entering markets in which we have limited or no prior experience; and
- potential loss of key employees, particularly those of the acquired organizations.
If we are unable to successfully integrate UForce or to create new or enhanced products, we may not achieve the anticipated benefits from the
pending acquisition. If we fail to achieve the anticipated benefits from the acquisition, we may incur increased expenses, experience a shortfall
in our anticipated revenues and we may not obtain a satisfactory return on our investment. In addition, if any significant number of UForce
employees fail to remain employed with us, we may experience difficulties in achieving the expected benefits of the acquisition.
Beginning in the three months ended September 30, 2000, we will begin to incur charges associated with this acquisition including
amortization of intangible assets and goodwill, in-process research and development and potentially from non-cash compensation charges
associated with certain stock options assumed as part of the transaction. We expect these charges to be significant.
IF WE DISCOVER PRODUCT DEFECTS, WE MAY HAVE PRODUCT-RELATED LIABILITIES WHICH MAY CAUSE US TO
LOSE REVENUES OR DELAY MARKET ACCEPTANCE OF OUR PRODUCTS
Products as complex as those offered by us frequently contain errors, defects and functional limitations when first introduced or as new
versions are released. We have in the past experienced such errors, defects or functional limitations. We sell products into markets that are
extremely demanding of robust, reliable, fully functional products. Therefore delivery of products with production defects or reliability, quality
or compatibility problems could significantly delay or hinder market acceptance of such products, which could damage our credibility with our
customers and adversely affect our ability to retain our existing customers and to attract new customers. Moreover, such errors, defects or
functional limitations could cause problems, interruptions, delays or a cessation of sales to our customers. Alleviating such problems may
require significant expenditures of capital and resources by us. Despite testing by us, our suppliers or our customers may find errors, defects or
functional limitations in new products after commencement of commercial production, resulting in additional development costs, loss of, or
delays in, market acceptance, diversion of technical and other resources from our other development efforts, product repair or replacement
costs, claims by our customers or others against us, or the loss of credibility with our current and prospective customers.
WE HAVE SIGNIFICANT INTERNATIONAL OPERATIONS, WHICH SUBJECTS US TO RISKS THAT COULD CAUSE OUR
OPERATING RESULTS TO DECLINE
Sales to customers outside of the United States represented 47%, 43% and 47% of total revenues in the fiscal years ended March 31, 2000,
1999 and 1998, respectively. Specifically, sales to customers in the Asia Pacific region represented 24%, 26% and 25% of our total revenues
for the fiscal years ended March 31, 2000, 1999 and 1998, respectively, while sales to customers in Europe represented 23%, 17% and 22% of
our total revenues for the same periods, respectively.
International sales of our semiconductors will continue to represent a substantial portion of our product revenues for the foreseeable future. In
addition, substantially all of our current products are, and substantially all of our future products will be, manufactured, assembled and tested
by independent third parties in foreign countries. International sales and manufacturing are subject to a number of risks, including general
economic conditions in regions such as Asia, changes in foreign government regulations and telecommunications standards, export license
requirements, tariffs and taxes, other trade barriers, fluctuations in currency exchange rates, difficulty in collecting accounts receivable and
difficulty in staffing and managing foreign operations. We are also subject to geopolitical risks, such as political, social and economic
instability, potential hostilities and changes in diplomatic and trade relationships, in connection with its international operations. A significant
decline in demand from foreign markets could have a material adverse effect on our business and operating results.
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