Adaptec 2011 Annual Report Download - page 21

Table of Contents
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 in connection with infringement claims made against them that relate to our products or
components included in our products, even where we obtain the components from a supplier. For example, we have been notified by two customers of patent
infringement claims by BIAX Corporation, allegedly involving components that we obtain from a supplier and use in our products. While we have not
incurred any losses from these claims to date or been made a party to the related litigation, we are currently reviewing these claims and our indemnification
obligations and rights as well as supporting our customers' efforts to defend these claims against them. We are incurring costs associated with this work and
responding to BIAX Corporation's subpoena. Further, there can be no assurance that we will not incur future losses in connection with such claims or, if we
incur any losses, that we will be fully indemnified against such losses by the supplier.
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.
We may be subject to intellectual property theft or misuse, which could result in third-party claims and harm our business and results of operations.
We regularly face attempts by others to gain unauthorized access through the Internet to our information technology systems, such as when such parties
masquerade as authorized users or surreptitiously introduce software. We might become a target of computer hackers who create viruses to sabotage or
otherwise attack our products and services. Hackers might attempt to penetrate our network security and gain access to our network and our data centers,
misappropriate our or our customers' proprietary information, including personally identifiable information, or cause interruptions of our internal systems and
services. We seek to detect and investigate these security incidents and to prevent their recurrence, but in some cases we might be unaware of an incident or
its magnitude and effects. The theft or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an
incident could adversely affect our competitive position and reduce marketplace acceptance of our products; the value of our investment in R&D, product
development, and marketing could be reduced; and third parties might assert against us or our customers claims related to resulting losses of confidential or
proprietary information or end-user data, or system reliability. Our business could be subject to significant disruption, and we could suffer monetary and other
losses, including the cost of product recalls and returns and reputational harm, in the event of such incidents and claims.
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
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