Adaptec 2002 Annual Report Download - page 34

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In addition, our networking products range widely in terms of the margins they generate. A change in product
sales mix could impact our operating results materially.
Design wins do not translate into near−term revenues and the timing of revenues
from newly designed products is often uncertain.
We have announced a number of new products and design wins for existing and new products. While some
industry analysts may use design wins as a metric for future revenues, many design wins have not, nor will
not generate any revenues as customer projects are cancelled or rejected by their end market. In the event a
design win generates revenue, the amount of revenue will vary greatly from one design win to another. In
addition, most revenue−generating design wins do not translate into near term revenues. Most
revenue−generating design wins take greater than 2 years to generate meaningful revenue.
Our revenue expectations may include growing sales of newer semiconductors based on early adoption of those
products by customers. These expectations would not be achieved if early sales of new system level products
by our customers do not increase over time. We may experience this more with design wins from early stage
companies, who tend to focus on leading−edge technologies that may be adopted less rapidly in the current
environment by telecommunications service providers.
Our restructurings have curtailed our resources and may have insufficiently
addressed market conditions.
We announced in 2001 plans to restructure our operations in response to the decline in demand for our
networking products. The restructuring plans included a workforce reduction of 564 employees, consolidation
of excess facilities, and contract settlement activities. As a result of our restructuring plans, we
recorded a charge of $195.2 million in 2001. On January 16th, 2003, we announced plans to further
restructure our operations through a workforce reduction of 175 employees and the shutdown of four of our
research and development sites. We will record a charge in the first two quarters of 2003 of our estimate of
the costs for the restructuring.
We reduced the work force and consolidated or shut down excess facilities in an effort to bring our expenses
into line with our reduced revenue expectations. However, for much of 2003, we do not expect that these
measures will be sufficient to offset lower revenues, and as such, we expect to continue to incur net
losses.
While management uses all available information to estimate these restructuring costs, particularly
facilities costs, our accruals may prove to be inadequate. If our actual sublease revenues or exiting
negotiations differ from our original assumptions, we may have to record additional charges, which could
materially affect our results of operations, financial position and cash flow.
33