iRobot 2010 Annual Report Download - page 63

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. Efforts to expand our product offerings beyond the 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 have grown rapidly. This rapid growth has placed, and will continue to place, a
significant strain on our management, administrative, operational and financial infrastructure. From January 2,
2010 to January 1, 2011, the number of our employees increased from 538 to 657. We anticipate further growth will
be required to address increases in our product offerings on 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. 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.
If the consumer robot market does not experience significant growth or if our products do not achieve
broad acceptance or if we fail to maintain or increase our consumer robot sales through our distribution
channels, we will not be able to achieve our anticipated level of growth.
We derive a substantial portion of our revenue from sales of our consumer robots, including our home care
robots. For the years ended January 1, 2011 and January 2, 2010, consumer robots accounted for 57.2% and 55.5%,
respectively, of our total revenue. We face challenges in predicting the future growth rate or the size of the consumer
robot market in general or the home care robot market in particular. Demand for home care robots may not increase,
or may decrease, either generally or in specific geographic markets, for particular types of robots or during
particular time periods.
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
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Form 10-K