Adaptec 2004 Annual Report Download - page 43

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government, imposition of tariffs and other potential trade barriers or regulations, uncertain protection for intellectual property rights
and generally longer receivable collection periods.
We are exposed to the credit risk of some of our customers and we may have difficulty collecting receivables from customers based
in foreign countries.
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 networking equipment customers, who generally do not guarantee our
credit receivables related to their contract manufacturers.
In addition, a significant portion of our sales flow through our distribution channel which generally represent a higher credit risk.
Should these companies enter into bankruptcy proceedings or breach their debt covenants, our revenues could decrease and collection
of our significant accounts receivables with these companies could be jeopardized.
We may lose our ability to design or produce products, could face additional unforeseen costs or could lose access to key customers
if any of the nations in which we conduct business impose trade barriers or new communications standards.
We may have difficulty obtaining export licenses for certain technology produced for us outside the United States. If a foreign
country imposes new taxes, tariffs, quotas, and other trade barriers and restrictions or the United States and a foreign country develop
hostilities or change diplomatic and trade relationships, we may not be able to continue manufacturing or sub−assembly of our
products in that country and may have fewer sales in that country. We may also have fewer sales in a country that imposes new
communications standards or technologies. This could inhibit our ability to meet our customers’ demand for our products and lower
our revenues.
Our strategy of expansion in new markets may cause our profit margins to decline.
Our business strategy contemplates expansion of our product offerings in relatively high volume target markets, such as storage and
consumer applications. These markets typically are characterized by stronger price competition and, consequently, lower per unit
profit margins. If we are successful in these markets, our overall profit margins could decline, as lower margin products may
comprise a greater portion of our revenues.
Our business strategy contemplates acquisition of other companies or technologies, which could adversely affect our operating
performance.
Acquiring products, technologies or businesses from third parties is part of our business strategy. Management may be diverted from
our operations while they identify and negotiate these acquisitions and integrate an acquired entity into our operations. Also, we may
be forced to develop expertise outside our existing businesses, and replace key personnel who leave due to an acquisition.
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