SanDisk 2009 Annual Report Download - page 83

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conts here. Annual Report
the acquisition increases, and we cannot assure you that we will realize the intended benefits of any acquisition.
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.
Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors
outside of our control, and no assurance can be given that our previous or future acquisitions will be successful
and will not materially adversely affect our business, operating results, or financial condition. Failure to manage
and successfully integrate acquisitions could materially harm our business and operating results. Even when an
acquired company has already developed and marketed products, there can be no assurance that such products
will be successful after the closing, will not cannibalize sales of our existing products, that product enhancements
will be made in a timely fashion or that pre-acquisition due diligence will have identified all possible issues that
might arise with respect to such company. Failed business combinations, or the efforts to create a business
combination, can also result in litigation.
Our success depends on our key personnel, including our executive officers, the loss of whom 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,
chairman 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. Historically, a significant portion of our employee compensation
has been dependent on equity compensation, which is directly tied to our stock price. Our employees continue to
hold a number of equity incentive awards that are underwater, and as a result, a significant portion of our equity
compensation has little or no retention value. We did not pay any bonus in 2009 related to fiscal year 2008.
Furthermore, in 2009, we canceled our annual merit salary increases, instituted forced shutdown days, and
reduced certain employee benefits to reduce costs. These actions or any further reduction in compensation
elements may make it more difficult for us to hire or retain key personnel.
Terrorist attacks, war, threats of war and government responses thereto may negatively impact our
operations, revenues, costs and stock price. Terrorist attacks, U.S. military responses to these attacks, war,
threats of war and any corresponding decline in consumer confidence could have a negative impact on consumer
demand. Any of these events may disrupt our operations or those of our customers and suppliers and may affect
the availability of materials needed to manufacture our products or the means to transport those materials to
manufacturing facilities and finished products to customers. Any of these events could also increase volatility in
the U.S. and world financial markets, which could harm our stock price and may limit the capital resources
available to us and our customers or suppliers, or adversely affect consumer confidence. We have substantial
operations in Israel including a development center in Northern Israel, near the border with Lebanon, and a
research center in Omer, Israel, which is near the Gaza Strip, areas that have experienced significant violence and
political unrest. Turmoil and unrest in Israel or the Middle East could cause delays in the development or
production of our products. This could harm our business and results of operations.
Natural disasters or epidemics in the countries in which we or our suppliers or subcontractors operate
could negatively impact our operations. Our operations, including those of our suppliers and subcontractors, are
concentrated in Milpitas, California; Raleigh, North Carolina; Brno, Czech Republic; Astugi and Yokkaichi,
Japan; Hsinchu and Taichung, Taiwan; and Dongguan, Futian, Shanghai and Shenzen, China. In the past, these
areas have been affected by natural disasters such as earthquakes, tsunamis, floods and typhoons, and some areas
have been affected by epidemics, such as avian flu or H1N1 flu. If a natural disaster or epidemic were to occur in
one or more of these areas, our operations could be significantly impaired and our business may be harmed. This
is magnified by the fact that we do not have insurance for most natural disasters, including earthquakes. This
could harm our business and results of operations.
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