SanDisk 2012 Annual Report Download - page 130

cannot predict whether the government of China or any other nation will impose regulations, quotas or
embargoes upon the materials incorporated into our products that would restrict the worldwide supply of these
materials or increase their cost. If China or any other major supplier were to restrict the supply available to us or
our suppliers or increase the cost of the materials used in our products, we could experience a shortage in supply
and an increase in production costs, which would harm our operating results.
If our security measures are breached and unauthorized access to our information technology systems is
obtained, we may lose proprietary data. Our security measures may be breached as a result of third-party action,
including computer hackers, employee error, malfeasance or otherwise, and result in unauthorized access to our
customers’ data or our data, including our IP and other confidential business information, or our information
technology systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change
frequently, we may be unable to anticipate these techniques or to implement adequate preventative measures.
Any security breach could result in disclosure of our trade secrets or confidential customer, supplier or employee
data, which could result in legal liability, harm to our reputation and other harm to our business.
We may need to raise additional financing, which could be difficult to obtain, and which, if not obtained in
satisfactory amounts, may prevent us from funding Flash Ventures, 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 anticipated investments in Flash Ventures for at least the next
twelve months; however, we may decide to raise additional funds to maintain the strength of our balance sheet or
fund our operations through equity, public or private debt, or lease financings. However, we cannot be certain
that we will be able to obtain additional financing on favorable terms, or at all. 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. 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, our credit rating may be downgraded, and we may
not be able to develop or enhance our technology or products, fulfill our obligations to Flash Ventures, take
advantage of future opportunities, grow our business or respond to competitive pressures or unanticipated
industry changes, any of which could harm our business.
We may be unable to protect our IP rights, which would harm our business, financial condition and operating
results. We rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality procedures
and licensing arrangements to protect our IP rights. In the past, we have been involved in significant and expensive
disputes regarding our IP rights and those of others, including claims that we may be infringing patents, trademarks
and other IP rights of third-parties. We expect that we will be involved in similar disputes in the future.
There can be no assurance that:
• any of our existing patents will continue to be held valid, if challenged;
• patents will be issued for any of our pending applications;
• any claims allowed from existing or pending patents will have sufficient scope or strength to protect us;
• our patents will be issued in the primary countries where our products are sold in order to protect our
rights and potential commercial advantage; or
• any of our products or technologies do not infringe on the patents of other companies.
In addition, our competitors may be able to design their products around our patents and other proprietary
rights. We also have patent cross-license agreements with several of our leading competitors. Under these
agreements, we have enabled competitors to manufacture and sell products that incorporate technology covered
by our patents. While we obtain license and royalty revenue or other consideration for these licenses, if we
continue to license our patents to our competitors, competition may increase and may harm our business,
financial condition and operating results.
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