Adaptec 2004 Annual Report Download - page 40

We may also experience an increase in the proportion of our revenues in future periods that will be from orders placed and fulfilled
within the same period, which would further decrease our ability to accurately forecast operating results. As most of our costs are
fixed in the short term, a reduction in demand for our products may cause a proportionately greater decline in our operating results.
We rely on a few customers for a major portion of our sales, any one of which could materially impact our revenues should they
change their ordering pattern.
We depend on a limited number of customers for a major portion of our revenues. Through direct, distributor and subcontractor
purchases, Cisco Systems accounted for more than 10% of our revenues in 2004. We do not have long−term volume purchase
commitments from any of our major customers. Accordingly, our future operating results will continue to depend on the success of
our largest customers and on our ability to sell existing and new products to these customers in significant quantities.
While our larger customers have indicated growth expectations in 2005, this may not necessarily translate into revenues for PMC.
The loss of our key customer, or a reduction in our sales to any major customer or our inability to attract new significant customers
could materially and adversely affect our business, financial condition or results of operations.
Our revenues may decline if we do not maintain a competitive portfolio of products.
We are experiencing significantly greater competition from many different market participants as the market in which we participate
matures. In addition, we are expanding into markets, such as the wireless infrastructure, enterprise storage, and generic
microprocessor markets, which have established incumbents with substantial financial and technological resources. We expect more
intense competition than that which we have traditionally faced as some of these incumbents derive a majority of their earnings from
these markets.
Increasing competition can make it more difficult to achieve design wins.
We typically face competition at the design stage, where customers evaluate alternative design approaches requiring integrated
circuits. The markets for our products are intensely competitive and subject to rapid technological advancement in design tools, wafer
manufacturing techniques, process tools and alternate networking technologies. We may not be able to develop new products at
competitive pricing and performance levels. Even if we are able to do so, we may not complete a new product and introduce it to
market in a timely manner. Our customers may substitute use of our products in their next generation equipment with those of current
or future competitors, reducing our future revenues. With the shortening product life and design−in cycles in many of our customers’
products, our competitors may have more opportunities to supplant our products in next generation systems.
Our customers are increasingly price conscious, as semiconductors sourced from third party suppliers comprise a greater portion of the
total materials cost in networking equipment. We continue to experience more aggressive price competition from competitors that
wish to enter
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