8x8 2002 Annual Report Download - page 35

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sales have been made, and are expected to continue to be made, on a purchase order basis. None of our customers has
entered into a long-
term agreement requiring it to purchase our products. In the future, we will need to gain purchase
orders for our products to earn additional revenue. Further, substantially all of our license and other revenues are
nonrecurring.
The IP telephony market is subject to rapid technological change and we depend on new product introduction in
order to maintain and grow our business
IP telephony is an emerging market that is characterized by rapid changes in customer requirements, frequent
introductions of new and enhanced products, and continuing and rapid technological advancement. To compete
successfully in this emerging market, we must continue to design, develop, manufacture, and sell new and enhanced
semiconductor and IP telephony software products and services that provide increasingly higher levels of performance
and reliability at lower cost. These new and enhanced products must take advantage of technological advancements and
changes, and respond to new customer requirements. Our success in designing, developing, manufacturing, and selling
such products and services will depend on a variety of factors, including:
1
the identification of market demand for new products;
1
the scalability of our IP telephony software products;
1
product and feature selection;
1
timely implementation of product design and development;
1
product performance;
1
cost-effectiveness of products under development;
1
effective manufacturing processes; and
1
success of promotional efforts.
Additionally, we may also be required to collaborate with third parties to develop our products and may not be able to
do so on a timely and cost-
effective basis, if at all. We have 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 we are 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, our operating results would decline and our business would not
grow.
The long and variable sales and deployment cycles for our IP telephony software products may cause our
revenue and operating results to vary
Our IP telephony software and semiconductor products, including our hosted iPBX and eSLEE products and our
Audacity family of semiconductors, have lengthy sales cycles, and we may incur substantial sales and marketing
expenses and expend significant management effort without making a sale. A customer's decision to purchase our
products often involves a significant commitment of its resources and a lengthy product evaluation and qualification
process. In addition, the length of our sales cycles will vary depending on the type of customer to whom we are selling
and the product being sold. Even after making the decision to purchase our products, our customers may deploy our
products slowly. Timing of deployment can vary widely and will depend on various factors, including:
1
the size of the network deployment;
1
the complexity of our customers' network environments;
1
our customers' skill sets;
1
the hardware and software configuration and customization necessary to deploy our products; and
1
our customers' ability to finance their purchase of our products.
As a result, it is difficult for us to predict the quarter in which our customers may purchase our IP telephony software or
semiconductor products, and our revenue and operating results may vary significantly from quarter to quarter.
If our products do not interoperate with our customers' networks, orders for our products will be delayed or
canceled and substantial product returns could occur, which could harm our business