iRobot 2007 Annual Report Download - page 58

Download and view the complete annual report

Please find page 58 of the 2007 iRobot annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

Even if consumer robots gain wide market acceptance, our robots may not adequately address market
requirements and may not continue to gain market acceptance. If robots generally, or our robots specifically, do not
gain wide market acceptance, we may not be able to achieve our anticipated level of growth, and our revenue and
results of operations would suffer.
Our business and results of operations could be adversely affected by significant changes in the policies
and spending priorities of governments and government agencies.
We derive a substantial portion of our revenue from sales to and contracts with U.S. federal, state and local
governments and government agencies, and subcontracts under federal government prime contracts. For the years
ended December 29, 2007 and December 30, 2006, U.S. federal government orders, contracts and subcontracts
accounted for 34.9% and 34.4%, respectively, of our total revenue. We believe that the success and growth of our
business will continue to depend on our successful procurement of government contracts either directly or through
prime contractors. Many of our government customers are subject to stringent budgetary constraints and our
continued performance under these contracts, or award of additional contracts from these agencies, could be
jeopardized by spending reductions or budget cutbacks at these agencies. We cannot assure you that future levels of
expenditures and authorizations will continue for governmental programs in which we provide products and
services. A significant decline in government expenditures generally, or with respect to programs for which we
provide products, could adversely affect our government product and funded research and development revenues
and prospects, which would harm our business, financial condition and operating results. Our operating results may
also be negatively impacted by other developments that affect these governments and government agencies
generally, including:
• changes in government programs that are related to our products and services;
• adoption of new laws or regulations relating to government contracting or changes to existing laws or
regulations;
• changes in political or public support for security and defense programs;
• delays or changes in the government appropriations process;
• uncertainties associated with the war on terror and other geo-political matters; and
• delays in the payment of our invoices by government payment offices.
These developments and other factors could cause governments and governmental agencies, or prime contractors
that use us as a subcontractor, to reduce their purchases under existing contracts, to exercise their rights to terminate
contracts at-will or to abstain from renewing contracts, any of which would cause our revenue to decline and could
otherwise harm our business, financial condition and results of operations
We face intense competition from other providers of robots, including diversified technology providers, as
well as competition from providers offering alternative products, which could negatively impact our
results of operations and cause our market share to decline.
We believe that a number of companies have developed or are developing robots that will compete directly
with our product offerings. Additionally, large and small companies, government-sponsored laboratories and
universities are aggressively pursuing contracts for robot-focused research and development. Many current and
potential competitors have substantially greater financial, marketing, research and manufacturing 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 robot floor care products such as AB Electrolux, Alfred Ka
¨rcher GmbH & Co., Samsung
Electronics Co., Ltd., LG Electronics Inc., Infinuvo/Metapo, Inc, Matsutek Enterprises Co Ltd., Microrobot
CO., Ltd., ACE ROBOT Co., Ltd. and Yujin Robotic Co. Ltd.
24