Toshiba 2006 Annual Report Download - page 58

original trial that totaled approximately US$465 million. Both the Company and its US subsidiary and Lexar Media filed
notices of appeal to the higher court on portions of the Superior Court’s decision, and the case is now pending before the Court
of Appeal of the State of California. The Group will pursue all available legal avenues to arrive at a just outcome in this matter.
(7) Development of new products
It is critically important for the Group to offer the market viable and innovative new products and services. The Group identifies
strategic products that will drive future profits, and defines strategic products to support the timely introduction of successive
products. However due to the rapid pace of technological innovation, the introduction of new technologies and products that
replace current products, and changes in technology standards, the introduction to market of optimum new products, including
SED, may be delayed, and new products that are brought to market, such as HD DVD players, may be accepted by the market
for a shorter period than anticipated. In addition, if the Group fails to assure sufficient funding and resources for continuous
product development, it may affect the Group’s ability to develop new products and services and to introduce them to the market.
(8) Investments in new business
The Group invests in companies involved in new business, including Mobile Broadcasting, as well as developing its own new
business opportunities. Many technological issues need to be resolved and new demand effectively discovered and captured
before a new line of business can become successful, and as such its progress and success are uncertain. If any new business in
which the Group invests or which the Group attempts to develop does not progress as planned, the Group may not recover
the funds and resources it has spent, and this may adversely affect the Group.
(9) Success of joint ventures and other business alliances
A key strategy of the Group in many of its businesses is the formation of joint ventures and business alliances optimized for
each business, in every area of the business, including research and development, production and marketing. If the Group
experiences differences with a partner in a joint venture or business alliance, in respect of financing, technological manage-
ment, product development or management strategies, such joint ventures or business alliances may be terminated.
(10) Global environment
The Group undertakes global business operations. Any changes in political, economic and social conditions, legal or regulatory
changes and exchange rate fluctuations in any region, may impact on market demand and the Group’s business operations.
As the Group expands overseas production, particularly in Asia, any occurrence of terrorism or an epidemic illness, such
as avian flu, could have a significant adverse effect on Group results.
(11) Natural disasters
Most of the Group’s Japanese production facilities are located in the Keihin region, part of the capital region, while key semi-
conductor production facilities are located in Kyushu, Tokai, Hanshin and Tohoku. While the Group promotes measures
such as earthquake-resistant buildings at production facilities, large-scale disasters, such as earthquakes or typhoons in
regions with production sites could damage or destroy production capabilities, cause operational and transportation inter-
ruptions, and affect production capabilities significantly.
(12) Measures against counterfeit products
While the Group protects and seeks to enhance the value of the “Toshiba” brand, there are lesser-quality counterfeit prod-
ucts worldwide created by third parties, which may dilute the value of the “Toshiba” brand. Distribution of those ‘copycat’
products may decrease the Group’s net sales.
(13) Product quality claims
While the Group has instituted measures to manufacture its products in accordance with appropriate quality-control stan-
dards, there can be no assurance that each of its products is free of defects or that they will not result in a large-scale recall,
lawsuits or other claims relating to product quality.
(14) Information securities
The Group keeps and manages various personal information obtained in the process of business operations. The Group also
keeps various trade secrets regarding the Group’s technology, marketing and other business operations. While the Group
makes every effort to manage this information properly, an unanticipated leak of such information, obtained and used illegal-
ly by a third party, could occur, and recovery may be costly.
Additionally, the role of information systems in the Group is critical to carry out business activities. While the Group
makes every effort to assure stable operation of its information systems, it is possible that their functionality could be
impaired or destroyed by computer viruses, disaster, terrorism, software or hardware failures, and other factors.
Management’s Discussion and Analysis