Seagate 2005 Annual Report Download - page 31

Table of Contents
Corporation patented head technology after November 22, 2000. The Bankruptcy Court order was affirmed by the U.S. District Court for the
Northern District of California on May 8, 2006, and we have decided not to appeal this decision. Because of the Read
-Rite bankruptcy,
Western Digital also does not have a right to a license to our patented head technology. In addition, neither Western Digital nor Seagate
otherwise has a license to the other’s intellectual property. Intellectual property litigation is expensive and time-consuming, regardless of the
merits of any claim, and could divert our management’s attention from operating our business. In addition, intellectual property lawsuits are
subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot assure you that we will be successful in
defending ourselves against intellectual property claims. Moreover, software patent litigation has increased due to the current uncertainty of the
law and the increasing competition and overlap of product functionality in the field. If we were to discover that our products infringe the
intellectual property rights of others, we would need to obtain licenses from these parties or substantially reengineer our products in order to
avoid infringement. We might not be able to obtain the necessary licenses on acceptable terms, or at all, or be able to reengineer our products
successfully. Moreover, if we are sued for patent infringement and lose the suit, we could be required to pay substantial damages and/or be
enjoined from using or selling the infringing products or technology. Any of the foregoing could cause us to incur significant costs and prevent
us from selling our products which could adversely affect our results of operations and financial condition.
Dependence on Key Personnel—The loss of some key executive officers and employees could negatively impact our business
prospects.
Our future performance depends to a significant degree upon the continued service of key members of management as well as marketing,
sales and product development personnel. The loss of one or more of our key personnel would have a material adverse effect on our business,
operating results and financial condition. We believe our future success will also depend in large part upon our ability to attract, retain and
further motivate highly skilled management, marketing, sales and product development personnel. We have experienced intense competition
for personnel, and we cannot assure you that we will be able to retain our key employees or that we will be successful in attracting, assimilating
and retaining personnel in the future.
System Failures—
System failures caused by events beyond our control could adversely affect computer equipment and electronic data
on which our operations depend.
Our operations are dependent upon our ability to protect our computer equipment and the information stored in our databases from
damage by, among other things, earthquake, fire, natural disaster, power loss, telecommunications failures, unauthorized intrusion and other
catastrophic events. As our operations become more automated and increasingly interdependent, our exposure to the risks posed by these types
of events will increase. A significant part of our operations is based in an area of California that has experienced power outages and
earthquakes and is considered seismically active. We do not have a contingency plan for addressing the kinds of events referred to in this
paragraph that would be sufficient to prevent system failures and other interruptions in our operations that could have a material adverse effect
on our business, results of operations and financial condition.
SOX 404 Compliance—While we believe that we currently have adequate internal control procedures in place, we are still exposed to
future risks of non
-compliance and will continue to incur costs associated with Section 404 of the Sarbanes-Oxley Act of 2002.
We have completed the evaluation of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act
of 2002 from which we excluded the internal control over financial reporting of Maxtor, which we acquired on May 19, 2006. Although our
assessment, testing, and evaluation resulted in our conclusion that as of June 30, 2006, our internal controls over financial reporting were
effective, we cannot predict the outcome of our testing in future periods. If our internal controls are ineffective in future periods, our financial
results or the market price of our shares could be adversely affected. We will incur additional expenses and commitment of management’
s time
in connection with further evaluations.
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