SanDisk 2005 Annual Report Download - page 99

securities in connection with an acquisition, the issuance may be dilutive to our existing stockholders. Alternatively,
acquisitions made entirely or partially for cash would reduce our cash reserves.
Acquisitions may require significant capital infusions, typically entail many risks and could result in
difficulties in assimilating and integrating the operations, personnel, technologies, products and information
systems of acquired companies. In order to realize the intended benefits of our recent acquisition of Matrix
Semiconductor, Inc., we will have to successfully integrate and retain key Matrix personnel. We may experience
delays in the timing and successful integration of acquired technologies and product development through volume
production, unanticipated costs and expenditures, changing relationships with customers, suppliers and strategic
partners, or contractual, intellectual property or employment issues. In addition, key personnel of an acquired
company may decide not to work for us. The acquisition of another company or its products and technologies may
also result in our entering into a geographic or business market in which we have little or no prior experience. These
challenges could disrupt our ongoing business, distract our management and employees, harm our reputation and
increase our expenses. These challenges are magnified as the size of the acquisition increases, and we cannot assure
you that we will realize the intended benefits of any acquisition. Furthermore, acquisitions may require large one-
time charges and can result in increased debt or contingent liabilities, adverse tax consequences, substantial
depreciation or deferred compensation charges, the amortization of identifiable purchased intangible assets or
impairment of goodwill, any of which could have a material adverse effect on our business, financial condition or
results of operations.
Our success depends on key personnel, including our executive officers, the loss of who could disrupt our
business. Our success greatly depends on the continued contributions of our senior management and other key
research and development, sales, marketing and operations personnel, including Dr. Eli Harari, our founder,
president and chief executive officer. We do not have employment agreements with any of our executive officers and
they are free to terminate their employment with us at any time. Our success will also depend on our ability to recruit
additional highly skilled personnel. We may not be successful in hiring or retaining key personnel and our key
personnel may not remain employed with us.
To manage our growth, we may need to improve our systems, controls and procedures. We have experienced
and may continue to experience rapid growth, which has placed, and could continue to place a significant strain on
our managerial, financial and operations resources and personnel. We expect that our number of employees,
including management-level employees, will continue to increase for the foreseeable future. We must continue to
improve our operational, accounting and financial systems and managerial controls and procedures, including fraud
procedures, and we will need to continue to expand, as well as, train and manage our workforce. If we do not
manage our growth effectively, our business could be harmed.
We expect to raise additional financing, which could be difficult to obtain, and which if not obtained in
satisfactory amounts may prevent us from funding the ventures with Toshiba, increasing our wafer supply,
developing or enhancing our products, taking advantage of future opportunities, growing our business or
responding to competitive pressures or unanticipated industry changes, any of which could harm our business.
We currently believe that we have sufficient cash resources to fund our operations as well as our investments in
Flash Partners for at least the next twelve months; however, we expect to raise additional funds, including funds to
meet our obligations with respect to Flash Partners, and we cannot be certain that we will be able to obtain additional
financing on favorable terms, if at all. From time to time, we may decide to raise additional funds through public or
private debt, equity or lease financings. If we issue additional equity securities, our stockholders will experience
dilution and the new equity securities may have rights, preferences or privileges senior to those of existing holders
of common stock or debt securities. If we raise funds through debt or lease financing, we will have to pay interest
and may be subject to restrictive covenants, which could harm our business. If we cannot raise funds on acceptable
terms, if and when needed, we may not be able to develop or enhance our products, fulfill our obligations to Flash
Partners, take advantage of future opportunities, grow our business or respond to competitive pressures or
unanticipated industry changes, any of which could have a negative impact on our business.
Anti-takeover provisions in our charter documents, stockholder rights plan and in Delaware law could
discourage or delay a change in control and, as a result, negatively impact our stockholders. We have taken a
number of actions that could have the effect of discouraging a takeover attempt. For example, we have a
24