Adaptec 2001 Annual Report Download - page 40

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40
Over the next few years, w e expect additional competitors, some of which may also have
greater financial and other resources, to enter the market with new products. These companies,
individually or collectively, could represent future competition for many design wins, and
subsequent product sales.
We must often redesign our products to meet rapidly evolving industry standards and
customer specifications, which may prevent or delay future revenue growth.
We sell products to a market whose characteristics include rapidly evolving industry standards,
product obsolescence, and new manufacturing and design technologies. Many of the standards
and protocols for our products are based on high-speed netw orking technologies that have not
been widely adopted or ratified by one or more of the standard-setting bodies in our customers’
industry. Our customers often delay or alter their design demands during this standard-setting
process. In response, we must redesign our products to suit these changing demands.
Redesign usually delays the production of our products. Our products may become obsolete
during these delays.
Since many of the products we develop do not reach full production sales volumes for a
number of years, we may incorrectly anticipate market demand and develop products
that achieve little or no market acceptance.
Our products generally take between 18 and 24 months from initial conceptualization to
development of a viable prototype, and another 6 to 18 months to be designed into our
customers’ equipment and into production. Our products often must be redesigned because
manufacturing yields on prototypes are unacceptable or customers redefine their products to
meet changing industry standards or customer specifications. As a result, we develop products
many years before volume production and may inaccurately anticipate our customers’ needs.
We are exposed to the credi t risk of some of our customers and we may have diff icul ty
coll ecting receivables from customers based in foreign countri es.
Many of our customers employ contract manufacturers to produce their products and manage
their inventories. Many of these contract manufacturers represent greater credit risk than our
netw orking equipment customers, who generally do not guarantee our credit receivables
related to their contract manufacturers.
In addition, international debt rating agencies have significantly downgraded the bond ratings
on a number of our larger customers, w hich had traditionally been considered financially
stable. Should these companies enter into receivership or breach debt covenants, our
significant accounts receivables with these companies could be jeopardized.
Our busi ness strategy contemplates acquisi tion of other companies or technol ogies, w hich
coul d adversel y aff ect our operating performance.