Seagate 2006 Annual Report Download - page 28

Table of Contents
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 indentures that govern our outstanding indebtedness, 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 that
integration of acquired companies would lead to the loss of key employees from those companies or the loss of
customers of those companies. In addition, the integration of any acquired companies would require substantial
attention from our senior management, which may limit the amount of time available to be devoted to our day-to-
day
operations or to the execution of our strategy. Growth by acquisition involves an even higher degree of risk to the
extent we combine new product offerings and enter new markets in which we have limited experience, and no
assurance can be given that acquisitions of entities with new or alternative business models, such as our recent
acquisition of EVault, will be successfully integrated or achieve their stated objectives. Furthermore, the expansion
of our business involves the risk that we might not manage our growth effectively, that we would incur additional
debt to finance these acquisitions or investments and that we would incur substantial charges relating to the write-off
of in-process research and development, similar to that which we incurred in connection with several of our prior
acquisitions. Each of these items could have a material adverse effect on our financial position and results of
operations.
In addition, we could issue additional common shares in connection with future acquisitions. For example, in
May 2006, we issued approximately 97 million of our common shares in connection with our acquisition of Maxtor
Corporation. Issuing shares in connection with acquisitions would have the effect of diluting your ownership
percentage of the common shares and could cause the price of our common shares to decline.
Risk of Intellectual Property Litigation — Our products may infringe the intellectual property rights of others,
which may cause us to incur unexpected costs or prevent us from selling our products.
We cannot be certain that our products do not and will not infringe issued patents or other intellectual property
rights of others. Historically, patent applications in the United States and some foreign countries have not been
publicly disclosed until the patent is issued, and we may not be aware of currently filed patent applications that relate
to our products or technology. If patents are later issued on these applications, we may be liable for infringement. We
may be subject to legal proceedings and claims, including claims of alleged infringement of the patents, trademarks
and other intellectual property rights of third parties by us, or our licensees in connection with their use of our
products.
We are currently subject to lawsuits involving intellectual property claims brought by Convolve, Inc. and the
Massachusetts Institute of Technology in the United States, Shao Tong in Nanjing, China and Siemens AG and
StorMedia Texas LLC in the United States which could cause us to incur significant additional costs or prevent
us from selling our products; which could adversely effect our results of operations and financial condition.
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, patent litigation
25