iRobot 2008 Annual Report Download - page 74

enhancements to our existing product offerings, as well as introduce a variety of new product offerings, to address
the changing needs of the markets in which we offer our robots. Delays in introducing new products and
enhancements, the failure to choose correctly among technical alternatives or the failure to offer innovative
products or enhancements at competitive prices may cause existing and potential customers to forego purchases of
our products and purchase our competitors’ products. Moreover, the development of new products has required, and
will require, that we expend significant financial and management resources. We have incurred, and expect to
continue to incur, significant research and development expenses in connection with our efforts to expand our
product offerings. If we are unable to devote adequate resources to develop new products or cannot otherwise
successfully develop new products or enhancements that meet customer requirements on a timely basis, our
products could lose market share, our revenue and profits could decline, or we could experience operating losses.
Moreover, if we are unable to offset our product development costs through sales of existing or new products or
product enhancements, our operating results and gross margins would be negatively impacted.
If we are unable to attract and retain additional skilled personnel, we may be unable to grow our
business.
To execute our growth plan, we must attract and retain additional, highly-qualified personnel. Competition for
hiring these employees is intense, especially with regard to engineers with high levels of experience in designing,
developing and integrating robots. Many of the companies with which we compete for hiring experienced
employees have greater resources than we have. In addition, in making employment decisions, particularly in
the high-technology industries, job candidates often consider the value of the equity they are to receive in
connection with their employment. Therefore, significant volatility in the price of our stock may adversely affect
our ability to attract or retain technical personnel. Furthermore, changes to accounting principles generally accepted
in the United States relating to the expensing of stock options may discourage us from granting the sizes or types of
stock options that job candidates may require to accept our offer of employment. If we fail to attract new technical
personnel or fail to retain and motivate our current employees, our business and future growth prospects could be
severely harmed.
We may be sued by third parties for alleged infringement of their proprietary rights, which could be
costly, time-consuming and limit our ability to use certain technologies in the future.
If the size of our markets increases, we would be more likely to be subject to claims that our technologies
infringe upon the intellectual property or other proprietary rights of third parties. In addition, the vendors from
which we license technology used in our products could become subject to similar infringement claims. Our
vendors, or we, may not be able to withstand third-party infringement claims. Any claims, with or without merit,
could be time- consuming and expensive, and could divert our management’s attention away from the execution of
our business plan. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay
substantial amounts or obtain a license to continue to use the technology that is the subject of the claim, or otherwise
restrict or prohibit our use of the technology. There can be no assurance that we would be able to obtain a license
from the third party asserting the claim on commercially reasonable terms, if at all, that we would be able to develop
alternative technology on a timely basis, if at all, or that we would be able to obtain a license to use a suitable
alternative technology to permit us to continue offering, and our customers to continue using, our affected product.
In addition, we may be required to indemnify our retail and distribution partners for third-party intellectual property
infringement claims, which would increase the cost to us of an adverse ruling in such a claim. An adverse
determination could also prevent us from offering our products to others. Infringement claims asserted against us or
our vendors may have a material adverse effect on our business, results of operations or financial condition.
If we fail to maintain or increase our consumer robot sales through our primary distribution channels,
which include third-party retailers, our product sales and results of operations would be negatively
impacted.
Chain stores and other national retailers are the primary distribution channels for our consumer robots and
accounted for approximately 21% and 31% of our total revenue for the fiscal years ended December 27, 2008 and
December 29, 2007, respectively. We do not have long-term contracts regarding purchase volumes with any of our
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