Adaptec 2006 Annual Report Download - page 20

Table of Contents
If the demand for our customers’ products declines, demand for our products will be similarly affected and our revenues, gross margins and
operating performance will be adversely affected.
Our customers are subject to their own business cycles, most of which are unpredictable in commencement, depth and duration. We cannot accurately predict the
continued demand of our customers’ products and the demands of our customers for our products. In the past, telecommunication service providers have reduced
capital spending without notice, adversely affecting our revenues. As a result of this uncertainty, our past operating results may not be indicative of our future
operating results. It is possible that, in future periods, our results may be below the expectations of public market analysts and investors. This could cause the
market price of our common stock to decline.
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 and
EMC Corporation accounted for more than 10% of our revenues in 2006. The companies that constitute our largest customers may change due to the Storage
Semiconductor Business and Passave acquisitions. We do not have long-term volume purchase commitments from any of our major customers. We sell our
products solely on the basis of purchase orders. Those customers could decide to cease purchasing products with little or no notice and without significant
penalties. A number of factors could cause our customers to cancel or defer orders, including interruptions to their operations due to a downturn in their
industries, delays in manufacturing their own product offerings into which our products are incorporated and natural disasters. 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.
The loss of a 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.
Product sales mix may adversely affect our profitability over time.
Our products range widely in terms of the margins they generate. A change in product sales mix could impact our operating results materially.
As a result of our internal review of our stock option practices and related restatement of financial results, we have become subject to an informal SEC
inquiry and shareholder litigation, which may not be resolved favorably and will require significant management time and attention and accounting
and legal resources, which could negatively affect our business, results of operations and cash flows.
As a result of our restatement of the 2005 10-K, the SEC has commenced an informal inquiry regarding the Company’s stock option practices, and we have been
named as defendant in three derivative lawsuits. In addition, we may become the subject of government or private litigation, including an investigation by the
Department of Justice. There are no assurances that the SEC inquiry will result in the same conclusions as those reached in the Audit Committee’s review. This
may result in different or additional materially adverse accounting or tax impacts
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠