iRobot 2008 Annual Report Download - page 72

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.
• developers of small unmanned ground vehicles such as Foster-Miller, Inc. — a wholly owned subsidiary of
QinetiQ North America, Inc., Allen-Vanguard Corporation, and Remotec — a division of Northrop Grum-
man Corporation; and
• established government contractors working on unmanned systems such as Lockheed Martin Corporation,
the Boeing Company, 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 home robots revenue is significantly seasonal. For the fiscal years ended December 27, 2008 and
December 29, 2007, we generated 58.6% and 74.6%, respectively, of our revenue from sales of consumer products
in the second half of the year. We expect a majority of such revenue will continue to be generated in the second half
of the year for the foreseeable future. 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. A significant portion of our operating expenses, such as
research and development expenses, certain marketing 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, we would not be able to reduce our operating expenses for the fiscal year.
24