iRobot 2009 Annual Report Download - page 61

Form 10-K
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. We do
not have long-term contracts regarding purchase volumes with any of our retail partners. As a result, purchases
generally occur on an order-by-order basis, and the relationships, as well as particular orders, can generally be
terminated or otherwise materially changed at any time by our retail partners. A decision by a major retail partner,
whether motivated by competitive considerations, financial difficulties, economic conditions or otherwise, to
decrease its purchases from us, to reduce the shelf space for our products or to change its manner of doing business
with us could significantly damage our consumer product sales and negatively impact our business, financial
condition and results of operations. In addition, during recent years, various retailers, including some of our
partners, have experienced significant changes and difficulties, including consolidation of ownership, increased
centralization of purchasing decisions, restructurings, bankruptcies and liquidations. These and other financial
problems of some of our retailers increase the risk of extending credit to these retailers. A significant adverse change
in a retail partner relationship with us or in a retail partner’s financial position could cause us to limit or discontinue
business with that partner, require us to assume more credit risk relating to that partner’s receivables or limit our
ability to collect amounts related to previous purchases by that partner, all of which could harm our business and
financial condition. Disruption of the iRobot on-line store could also decrease our home care robot sales.
If we fail to enhance our brand, our ability to expand our customer base will be impaired and our
operating results may suffer.
We believe that developing and maintaining awareness of the iRobot brand is critical to achieving widespread
acceptance of our existing and future products and is an important element in attracting new customers. Further-
more, we expect the importance of global brand recognition to increase as competition develops. Successful
promotion of our brand will depend largely on the effectiveness of our marketing efforts, including our mass media
outreach, in-store training and presentations and public relations, and our ability to provide customers with reliable
and technically sophisticated robots at competitive prices. If customers do not perceive our products to be of high
quality, our brand and reputation could be harmed, which could adversely impact our financial results. In addition,
brand promotion efforts may not yield significant revenue or increased revenue sufficient to offset the additional
expenses incurred in building our brand. If we incur substantial expenses to promote and maintain our brand, we
may fail to attract sufficient customers to realize a return on our brand-building efforts, and our business would
suffer.
If our existing collaborations are unsuccessful or we fail to establish new collaborations, our ability to
develop and commercialize additional products could be significantly harmed.
If we cannot maintain our existing collaborations or establish new collaborations, we may not be able to
develop additional products. We anticipate that some of our future products will be developed and commercialized
in collaboration with companies that have expertise outside the robot field. For example, we are currently
collaborating with: The Boeing Company, acting by and through its Integrated Defense Systems Combat Systems
business unit, on the development of the PackBot SUGV-Early; Lockheed-Martin on the FCS Command Controller
device; ICx Nomadics for joint development of explosive and chemical detection unmanned systems, under the
Joint Force protection Advanced Security System. Under these collaborations, we may be dependent on our
collaborators to fund some portion of development of the product or to manufacture and market either the primary
product that is developed pursuant to the collaboration or complementary products required in order to operate our
products. In addition, we cannot assure you that we will be able to establish additional collaborative relationships on
acceptable terms.
Our existing collaborations and any future collaborations with third parties may not be scientifically or
commercially successful. Factors that may affect the success of our collaborations include the following:
• our collaborators may not devote the resources necessary or may otherwise be unable to complete
development and commercialization of these potential products;
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