NVIDIA 2003 Annual Report Download - page 36

In addition, the industry has experienced significant economic downturns at various times, characterized by
diminished product demand and accelerated erosion of average selling prices. We may experience substantial
period-to-period fluctuations in results of operations due to general semiconductor industry conditions.
Our stock price may continue to experience significant short-term fluctuations.
The price of our common stock has fluctuated greatly. These price fluctuations have been rapid and severe.
The price of our common stock may continue to fluctuate greatly in the future due to factors that are
non-company specific, such as the decline in the U.S. economy, acts of terror against the U.S., war or due to a
variety of company specific factors, including quarter to quarter variations in our operating results, shortfalls in
revenue or earnings from levels expected by securities analysts and the other factors discussed above in these risk
factors. In the past, following periods of volatility in the market price of a company’s stock, securities class
action litigation has been initiated against the issuing company. Since February 2002, multiple securities class
action lawsuits and several derivative suits have been filed against us. We expect that this litigation, whether or
not resolved favorably, may result in substantial cost and a diversion of management’s attention and resources,
which could harm our revenues and earnings. Any adverse determination in this litigation could also subject us to
significant liabilities. See “Legal Proceedings” and Note 9 of the Notes to Consolidated Financial Statements for
a description of this litigation.
We are exposed to fluctuations in the market values of our portfolio investments and in interest rates.
For additional information regarding risks associated with the market value of portfolio investments and
interest rates, see Item 7A “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk.”
Risks Related to Intellectual Property, Litigation and Government Action
Our industry is characterized by vigorous protection and pursuit of intellectual property rights or
positions that could result in substantial costs to us.
The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property
rights and positions, which has resulted in protracted and expensive litigation. The 3D graphics market in
particular has been characterized recently by the aggressive pursuit of intellectual property positions, and we
expect our competitors to continue to pursue aggressive intellectual property positions. In addition, from time to
time we receive notices or are included in legal actions alleging that we have infringed patents or other
intellectual property rights owned by third parties. We expect that, as the number of issued hardware and
software patents increases, and as competition in our product lines intensifies, the volume of intellectual property
infringement claims may increase. If infringement claims are made against us, we may seek licenses under the
claimants’ patents or other intellectual property rights. However, licenses may not be offered at all or on terms
acceptable to us, particularly by competitors. The failure to obtain a license from a third party for technology
used by us could cause us to incur substantial liabilities and to suspend the manufacture of and sale of one or
more products, which could reduce our revenues and harm our business. Furthermore, we may initiate claims or
litigation against third parties for infringement of our proprietary rights or to establish the validity of our
proprietary rights. We have agreed to indemnify certain customers for claims of infringement arising out of sale
of our products.
Litigation against us or our customers concerning infringement would likely result in significant expense
to us and divert the efforts of our technical and management personnel.
We are currently subject to claims of patent infringement, and we may be subject to patent infringement
claims or suits brought by other parties in the future. We do not believe that current actions will have a material
impact on our business or financial condition. However, these claims and any future lawsuits could divert our
resources and result in the payment of substantial damages.
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