Audiovox 2005 Annual Report Download - page 16

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We cannot assure you that we can grow the revenues of our Electronics business
or maintain profitability. As a result, the Company's revenues and profitability
will depend on our ability to maintain and generate additional customers. A
reduction in demand for the products and services would have a material adverse
effect on our business. The sustainability of current levels of our Electronics
business and the future growth of such revenues, if any, will depend on, among
other factors:
o the overall performance of the economy,
o competition within key markets,
o customer acceptance of products and services, and
o the demand for other products and services.
We cannot assure you that we will maintain or increase our current level of
revenues or profits from the Electronics business in future periods.
THE ELECTRONICS BUSINESS IS HIGHLY COMPETITIVE AND FACES SIGNIFICANT COMPETITION
FROM ORIGINAL EQUIPMENT MANUFACTURERS (OEMS) AND DIRECT IMPORTS BY OUR RETAIL
CUSTOMERS.
The market for electronics is highly competitive across all product lines.
We compete against many established companies who have substantially greater
resources than we do. We compete directly with OEMs, including divisions of
well−known automobile manufacturers, in the autosound, auto security, mobile
video and accessories industry. Most of these companies have substantially
greater financial and other resources than we do. We believe that OEMs have
increased sales pressure on new car dealers with whom they have close business
relationships to purchase OEM−supplied equipment and accessories. OEMs have also
diversified and improved their product lines and accessories in an effort to
increase sales of their products. To the extent that OEMs succeed in their
efforts, this success would have a material adverse effect on our sales of
automotive entertainment and security products to new car dealers. In addition,
we compete with major retailers who may at any time choose to direct import
products that we may currently supply.
WE DO NOT HAVE LONG−TERM SALES CONTRACTS WITH ANY OF OUR CUSTOMERS.
Sales of our products are made by written purchase orders and are
terminable at will by either party. The unexpected loss of all or a significant
portion of sales to any one of our large customers could have a material adverse
effect on our performance.
SALES IN OUR ELECTRONICS BUSINESS ARE DEPENDENT ON NEW PRODUCTS AND CONSUMER
ACCEPTANCE.
Our Electronics business depends, to a large extent, on the introduction
and availability of innovative products and technologies. Significant sales of
new products in niche markets, such as navigation, satellite radios, flat−panel
TVs and mobile video systems, have fueled the recent growth of our Electronics
business. If we are not able to continually introduce new products that achieve
consumer acceptance, our sales and profit margins may decline.
SINCE WE DO NOT MANUFACTURE OUR PRODUCTS, WE DEPEND ON OUR SUPPLIERS TO PROVIDE
US WITH ADEQUATE QUANTITIES OF HIGH QUALITY COMPETITIVE PRODUCTS ON A TIMELY
BASIS.
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