iRobot 2005 Annual Report Download - page 27

resources than we possess, and there can be no assurance that our current and future competitors will not be
more successful than us. Moreover, while we believe many of our customers purchase our floor vacuuming
robots as a supplement to, rather than a replacement for, their traditional vacuum cleaners; we also compete in
some cases with providers of traditional vacuum cleaners. Our current principal competitors include:
‚ developers of robotic floor care products such as AB Electrolux, Alfred Karcher GmbH & Co.,
Samsung Electronics Co., Ltd., LG Electronics Inc., Infinuvo/Metapo, Inc., Matsutek Enterprises Co
Ltd. and Yujin Robotic Co. Ltd.;
‚ developers of small unmanned ground vehicles such as Foster-Miller, Inc. Ì a wholly owned
subsidiary of QinetiQ North America, Inc., Allen-Vanguard Corporation, and Remotec Ì a division of
Northrop Grumman Corporation; and
‚ established government contractors working on unmanned systems such as Lockheed Martin Corpora-
tion, BAE Systems, Inc. and General Dynamics Corporation.
In the event that the robot market expands, we expect that competition will intensify as additional
competitors enter the market and current competitors expand their product lines. Companies competing with
us may introduce products that are competitively priced, have increased performance or functionality, or
incorporate technological advances that we have not yet developed or implemented. Increased competitive
pressure could result in a loss of sales or market share or cause us to lower prices for our products, any of
which would harm our business and operating results.
The market for robots is highly competitive, rapidly evolving and subject to changing technologies,
shifting customer needs and expectations and the likely increased introduction of new products. Our ability to
remain competitive will depend to a great extent upon our ongoing performance in the areas of product
development and customer support. We cannot assure you that our products will continue to compete
favorably or that we will be successful in the face of increasing competition from new products and
enhancements introduced by existing competitors or new companies entering the markets in which we provide
products. Our failure to compete successfully could cause our revenue and market share to decline, which
would negatively impact our results of operations and financial condition.
Our business is significantly seasonal and, because many of our expenses are based on anticipated levels
of annual revenue, our business and operating results will suffer if we do not achieve revenue consistent
with our expectations.
Our consumer product revenue is significantly seasonal. Historically, as much as 75% of our revenue from
sales of consumer products has been, and a majority of such revenue is expected to continue to be, generated
in the second half of the year. As a result of this seasonality, we believe that quarter-to-quarter comparisons of
our operating results are not necessarily meaningful and that these comparisons cannot be relied upon as
indicators of future performance.
We base our current and future expense levels on our internal operating plans and sales forecasts,
including forecasts of holiday sales for our consumer products. Most of our operating expenses, such as
research and development expenses, advertising and promotional expenses and employee wages and salaries,
do not vary directly with sales and are difficult to adjust in the short term. As a result, if sales for a quarter,
particularly the final quarter of a fiscal year, are below our expectations, we might not be able to reduce
operating expenses for that quarter and, therefore, would not be able to reduce our operating expenses for the
fiscal year. Accordingly, a sales shortfall during a fiscal quarter, and in particular the fourth quarter of a fiscal
year, could have a disproportionate effect on our operating results for that quarter or that year. As a result of
these factors, we may report operating results that do not meet the expectations of equity research analysts and
investors. This could cause the trading price of our common stock to decline.
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