Seagate 2004 Annual Report Download - page 53

Table of Contents
controls and other restraints on trade. In addition, the governments of many countries, including China, Malaysia, Singapore and
Thailand, in which we have significant operating assets, have exercised and continue to exercise significant influence over many
aspects of their domestic economies and international trade.
•
Potential Adverse Tax Consequences
. Our international operations create a risk of potential adverse tax consequences, including
imposition of withholding or other taxes on payments by subsidiaries.
•
Increased Costs
. The shipping and transportation costs associated with our international operations are typically higher than those
associated with our U.S. operations, resulting in decreased operating margins in some foreign countries.
Political Risks Associated with International Operations—Our international operations subject us to risks related to political unrest
and terrorism.
• Credit and Access to Capital Risks . Our international customers could have reduced access to working capital due to higher
interest rates, reduced bank lending resulting from contractions in the money supply or the deterioration in the customer’s or its
bank
’
s financial condition, or the inability to access other financing.
We have manufacturing facilities in parts of the world that periodically experience political unrest. This could disrupt our ability to
manufacture important components as well as cause interruptions and/or delays in our ability to ship components to other locations for
continued manufacture and assembly. Any such delays or interruptions could result in delays in our ability to fill orders and have an adverse
effect on our results of operation and financial condition. U.S. and international responses to the terrorist attacks on September 11, 2001, the
ongoing hostilities in Afghanistan and Iraq and the risk of hostilities with North Korea could exacerbate these risks.
Legal and Operational Risks Associated with International Operations—Our international operations subject us to risks related to
staffing and management, legal and regulatory requirements and the protection of intellectual property.
Operating outside of the United States creates difficulties associated with staffing and managing our international manufacturing
facilities, complying with local legal and regulatory requirements and protecting our intellectual property. We cannot assure you that we will
continue to be found to be operating in compliance with applicable customs, currency exchange control regulations, transfer pricing regulations
or any other laws or regulations to which we may be subject. We also cannot assure you that these laws will not be modified.
Risks Associated with Future Acquisitions—We may not be able to identify suitable strategic alliance, acquisition or investment
opportunities, or successfully acquire and integrate companies that provide complementary products or technologies.
Our growth strategy may involve pursuing strategic alliances with, and making acquisitions of or investments in, other companies that are
complementary to our business. There is substantial competition for attractive strategic alliance, acquisition and investment candidates. We
may not be able to identify suitable acquisition, investment or strategic partnership candidates. Even if we were able to identify them, we
cannot assure you that we will be able to partner with, acquire or invest in suitable candidates, or integrate acquired technologies or operations
successfully into our existing technologies and operations. Our ability to finance potential acquisitions will be limited by our high degree of
leverage, the covenants contained in the indenture that governs our outstanding 8% senior notes, the credit agreement that governs our senior
secured credit facilities and any agreements governing any other debt we may incur.
If we are successful in acquiring other companies, these acquisitions may have an adverse effect on our operating results, particularly
while the operations of the acquired business are being integrated. It is also likely
50