Adaptec 2007 Annual Report Download - page 30

Table of Contents
Our products employ technology that may infringe on the intellectual property and the proprietary rights of third parties, which may expose us to
litigation and prevent us from selling our products.
Vigorous protection and pursuit of intellectual property rights or positions characterize the semiconductor industry. This often results in expensive and
lengthy litigation. We, and our customers or suppliers, may be accused of infringing patents or other intellectual property rights owned by third parties in the
future. An adverse result in any litigation could force us to pay substantial damages, stop manufacturing, using and selling the infringing products, spend
significant resources to develop non-infringing technology, discontinue using certain processes or obtain licenses to the infringing technology. In addition, we
may not be able to develop non-infringing technology, or find appropriate licenses on reasonable terms or at all.
Patent disputes in the semiconductor industry are often settled through cross-licensing arrangements. Our portfolio of patents may not have the breadth to
enable us to settle an alleged patent infringement claim through a cross-licensing arrangement. We may therefore be more exposed to third party claims than
some of our larger competitors and customers.
The majority of our customers are required to obtain licenses from and pay royalties to third parties for the sale of systems incorporating our
semiconductor devices. Customers may also make claims against us with respect to infringement.
Furthermore, we may initiate claims or litigation against third parties for infringing our proprietary rights or to establish the validity of our proprietary
rights. This could consume significant resources and divert the efforts of our technical and management personnel, regardless of the litigation’s outcome.
Securities we issue to fund our operations could dilute your ownership.
We may decide to raise additional funds through public or private debt or equity financing. If we raise funds by issuing equity securities, the percentage
ownership of current stockholders will be reduced and the new equity securities may have priority rights to your investment. We may not obtain sufficient
financing on terms that are favorable to you or us. We may delay, limit or eliminate some or all of our proposed operations if adequate funds are not available.
Our stock price has been and may continue to be volatile.
We expect that the price of our common stock will continue to fluctuate significantly, as it has in the past. In particular, fluctuations in our stock price and
our price-to-earnings multiple may have made our stock attractive to momentum, hedge or day-trading investors who often shift funds into and out of stocks
rapidly, exacerbating price fluctuations in either direction particularly when viewed on a quarterly basis.
Securities class action litigation has often been instituted against a company following periods of volatility and decline in the market price of their
securities. If instituted against us, regardless of the outcome, such litigation could result in substantial costs and diversion of our management’s attention and
resources and have a material adverse effect on our business, financial condition and operating results. In addition, we could incur substantial punitive and other
damages relating to such litigation.
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Source: PMC SIERRA INC, 10-K, February 22, 2008