iRobot 2008 Annual Report Download - page 70

Our reliance on these contract manufacturers involves certain risks, including the following:
• lack of direct control over production capacity and delivery schedules;
• lack of direct control over quality assurance, manufacturing yields and production costs;
• lack of enforceable contractual provisions over the production and costs of consumer products;
• risk of loss of inventory while in transit from China or India; and
• risks associated with international commerce with China and India, including unexpected changes in legal
and regulatory requirements, changes in tariffs and trade policies, risks associated with the protection of
intellectual property and political and economic instability.
Any interruption in the manufacture of our products would be likely to result in delays in shipment, lost sales
and revenue and damage to our reputation in the market, all of which would harm our business and results of
operations. In addition, while our contract obligations with our contract manufacturers in China are typically
denominated in U.S. dollars, changes in currency exchange rates could impact our suppliers and increase our prices.
Any efforts to expand our product offerings beyond our current markets may not succeed, which could
negatively impact our operating results.
We have focused on selling our robots in the home floor care and military markets. We plan to expand into
other markets. For example, we have devoted significant time and incurred expenses in connection with the
development of our Looj gutter cleaning robot. In addition, we have devoted significant time and incurred expenses
in connection with the development of the Negotiator product for the civil law enforcement and the Seaglider
product for the maritime market. Efforts to expand our product offerings beyond the two markets that we currently
serve, however, may divert management resources from existing operations and require us to commit significant
financial resources to an unproven business, either of which could significantly impair our operating results.
Moreover, efforts to expand beyond our existing markets may never result in new products that achieve market
acceptance, create additional revenue or become profitable.
If we are unable to implement appropriate controls and procedures to manage our growth, we may not be
able to successfully implement our business plan.
Our headcount and operations are growing rapidly. This rapid growth has placed, and will continue to place, a
significant strain on our management, administrative, operational and financial infrastructure. From December 29,
2007 to December 27, 2008, the number of our employees increased from 423 to 479. We anticipate further growth
will be required to address increases in our product offerings and the geographic scope of our customer base. Our
success will depend in part upon the ability of our senior management to manage this growth effectively. To do so,
we must continue to hire, train, manage and integrate a significant number of qualified managers and employees. If
our new employees perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new
employees, or retaining these or our existing employees, our business may suffer.
In addition, we face risks associated with managing operations outside the United States, including operations
in Hong Kong, China, India and the United Kingdom. To manage the expected continued growth of our headcount
and operations, we will need to continue to improve our information technology infrastructure, operational,
financial and management controls and reporting systems and procedures, and manage expanded operations in
geographically distributed locations. Our expected additional headcount and capital investments will increase our
costs, which will make it more difficult for us to offset any future revenue shortfalls by offsetting expense reductions
in the short term. If we fail to successfully manage our growth, we will be unable to successfully execute our
business plan, which could have a negative impact on our business, financial condition or results of operations.
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