Adaptec 2005 Annual Report Download - page 24

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Table of Contents
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 aggressive price competition from competitors that wish to enter into the market segments in which we
participate. These circumstances may make some of our products less competitive, and we may be forced to decrease our prices significantly to win a design. We
may lose design opportunities or may experience overall declines in gross margins as a result of increased price competition.
Over the next few years, we expect additional competitors, some of which may also have greater financial and other resources, to enter these markets with
new products. These companies, individually or collectively, could represent future competition for many design wins, and subsequent product sales.
Design wins do not translate into near-term revenues and the timing of revenues from newly designed products is often uncertain.
From time to time, we announce 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, and will not, generate any revenues for us, as customer projects are cancelled or unsuccessful in their end
market. In the event a design win generates revenues, the amount of revenues 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 more than two years to generate meaningful
revenues.
We may be unsuccessful in transitioning the design of our new products to new manufacturing processes.
Many of our new products are designed to take advantage of new manufacturing processes offering smaller device geometries as they become available,
since smaller geometries can provide a product with improved features such as lower power requirements, increased performance, more functionality and lower
cost. We believe that the transition of our products to, and introduction of new products using, smaller device geometries is critical for us to remain competitive.
We could experience difficulties in migrating to future smaller device geometries or manufacturing processes, which would result in the delay of the production
of our products. Our products may become obsolete during these delays, or allow competitors’ parts to be chosen by customers during the design process.
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 12 and 24 months from initial conceptualization to development of a viable prototype, and another 3 to 18 months to
be designed into our customers’ equipment and sold in production quantities. We sell products whose
18
Source: PMC SIERRA INC, 10-K, February 22, 2008