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EXHIBIT 99.1
Risk Factors
incorporated by reference to Annual Report on Form 10-K.
You should carefully consider the risks described below, together with
all of the other information in our SEC filings, before making an
investment decision to buy or sell our common stock. If any of the
following risks actually occur, our business, financial condition or
results of operations could be materially harmed. If our business is
harmed, the trading price of our common stock could decline, and you
may lose all or part of your investment. Our SEC reports may also
contain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including the risks faced by us described below and elsewhere
in our reports.
OUR SALES REFLECT THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY, WHICH
CAN CAUSE OUR OPERATING RESULTS TO FLUCTUATE SIGNIFICANTLY AND COULD
CAUSE US TO FAIL TO ACHIEVE ANTICIPATED SALES
Our business depends in significant part upon capital expenditures by
manufacturers of semiconductor devices, including manufacturers that
are opening new or expanding existing fabrication facilities. The
level of capital expenditures by these manufacturers of semiconductor
devices depends upon the current and anticipated market demand for
such devices and the products utilizing such devices. The
semiconductor industry is highly cyclical. The industry has in the
past, and will likely in the future, experience periods of oversupply
that result in significantly reduced demand for capital equipment,
including our systems. When these periods occur, our operating results
and financial condition are adversely affected. For instance, we were
affected by a severe downturn in the semiconductor industry in 1998,
during which our sales decreased for the first three consecutive
quarters of 1998 before increasing in the fourth quarter of 1998 and
throughout 1999. We anticipate that a significant portion of new
orders will depend upon demand from semiconductor manufacturers and
independent foundries who build or expand large fabrication
facilities. If existing fabrication facilities are not expanded or new
facilities are not built, demand for our systems may not develop or
increase, and we may be unable to generate significant new orders for
our systems. If we are unable to develop new orders for our systems,
we will not achieve anticipated net sales levels. Any future downturns
or slowdowns in the semiconductor industry will materially and
adversely affect our net sales and operating results.
MOST OF OUR REVENUE COMES FROM A SMALL NUMBER OF LARGE SALES, AND ANY
DELAY IN THE TIMING OF INDIVIDUAL SALES COULD CAUSE OUR OPERATING
RESULTS TO FLUCTUATE FROM QUARTER TO QUARTER
A delay in a shipment near the end of a quarter may cause net sales in
that quarter to fall below our expectations and the expectations of
market analysts or investors. We derive most of our revenues from the
sale of a relatively small number of expensive systems. The list
prices on these systems range from $500,000 to over $2.2 million. At
our current revenue level, each sale, or failure to make a sale, could
have a material effect on us. Our lengthy sales cycle, coupled with
customers' competing capital budget considerations, make the timing of
customer orders uneven and difficult to predict. In addition, our
backlog at the beginning of a quarter typically does not include all
orders required to achieve our sales objectives for that quarter. As a
result, our net sales and operating results for a quarter depend on us
shipping orders as scheduled during that quarter as well as obtaining
new orders for systems to be shipped in that same quarter. Any delay
in
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scheduled shipments or in shipments from new orders would materially
and adversely affect our operating results for that quarter, which
could cause our stock price to decline.
OUR QUARTERLY FINANCIAL RESULTS FLUCTUATE SIGNIFICANTLY AND MAY FALL
SHORT OF ANTICIPATED LEVELS, WHICH COULD CAUSE OUR STOCK PRICE TO
DECLINE
We base our operating expenses on anticipated revenue levels, and a
substantial percentage of our expenses are fixed in the short term. As
a result, any delay in generating or recognizing revenues could cause
our operating results to be below the expectations of market analysts
or investors, which could cause the price of our common stock to
decline. Our quarterly revenue and operating results have varied
significantly in the past and may vary significantly in the future due
to a number of factors, including: - market acceptance of our systems
and the products of our customers; - substantial changes in revenues
from significant customers; - increased manufacturing overhead
expenses due to reductions in the number of systems manufactured; -
timing of announcement and introduction of new systems by us and by
our competitors; - sudden changes in component prices or availability;
- changes in product mix; - delays in orders due to customer financial
difficulties; - manufacturing inefficiencies caused by uneven or
unpredictable order patterns, reducing our gross margins; and - higher
fixed costs due to increased levels of research and development and
expansion of our worldwide sales and marketing organization. Due to
the foregoing factors, we believe that period-to-period comparisons of
our operating results should not be relied upon as an indicator of our
future performance.
WE HAVE INCURRED NET OPERATING LOSSES FOR THE PRIOR TWO YEARS, WE MAY
NOT ACHIEVE OR MAINTAIN PROFITABILITY ON AN ANNUAL BASIS, AND IF WE DO
NOT, WE MAY NOT UTILIZE DEFERRED TAX ASSETS
We incurred net losses of approximately $22.4 million for the year
ended December 31, 1998 and $800,000 for the year ended December 31,
1999. We expect to continue to incur significant research and
development and selling, general and administrative expenses. We will
need to generate significant increases in net sales to achieve and
maintain profitability on an annual basis, and we may not be able to
do so. In addition, because of these factors, through December 31,
1999, we had not been in a position to utilize our deferred tax
assets. Our ability to realize our deferred tax assets in future
periods will depend on our ability to achieve and maintain
profitability on an annual basis. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for a
further discussion of our net operating losses.
YEAR-TO-YEAR CHANGES IN OUR LIST OF MAJOR CUSTOMERS MAKE IT DIFFICULT
TO FORECAST OUR REVENUE AND ACHIEVE OUR SALES GOALS
During 1999, one customer, Samsung, accounted for approximately 20% of
our net sales. During 1998, we had no individually significant
customers, although sales to our Japanese distributor, Marubeni,
constituted 16% of our net sales. During 1997, one customer, Taiwan
Semiconductor Manufacturing Company, accounted for approximately 11%
of our net sales. Although the composition of the group comprising our
largest customers has varied from year to year, our top ten customers
accounted for 63% of our net sales in 1999, 56% in 1998 and 60% in
1997. Our systems represent major capital investments that our
customers and potential customers purchase or replace infrequently.
Therefore, our list of major customers changes substantially from year
to year, and we cannot predict that a major customer in one year will
make significant purchases from us in future years. Accordingly, it is
difficult for us to accurately forecast our revenues and operating
results from year to year. While we actively pursue new customers, if
we are unable to successfully make significant sales to new customers
or sell additional systems
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to existing customers, we may not achieve anticipated net sales levels
and our business and operating results would suffer.
OUR LENGTHY SALES CYCLE INCREASES OUR COSTS AND REDUCES THE
PREDICTABILITY OF OUR REVENUE
Sales of our systems depend upon the decision of a prospective
customer to increase manufacturing capacity. That decision typically
involves a significant capital commitment by our customers.
Accordingly, the purchase of our systems typically involves time
consuming internal procedures associated with the evaluation, testing,
implementation and introduction of new technologies into our
customers' manufacturing facilities. For many potential customers, an
evaluation as to whether new semiconductor manufacturing equipment is
needed typically occurs infrequently. Following an evaluation by the
customer as to whether our systems meet its qualification criteria, we
have experienced in the past and expect to experience in the future,
delays in finalizing system sales while the customer evaluates and
receives approval for the purchase of our systems and constructs a new
facility or expands an existing facility. Due to these factors, our
systems typically have a lengthy sales cycle during which we may
expend substantial funds and management effort. The time between our
first contact with a customer and the customer placing its first order
typically lasts from nine to twelve months and is often even longer.
This lengthy sales cycle makes it difficult to accurately forecast
future sales and may cause our quarterly and annual revenue and
operating results to fluctuate significantly from period to period. If
anticipated sales from a particular customer are not realized in a
particular period due to this lengthy sales cycle, our operating
results may be adversely affected.
WE ARE HIGHLY DEPENDENT ON OUR INTERNATIONAL SALES, PARTICULARLY SALES
IN ASIAN COUNTRIES, AND IF WE ARE UNABLE TO SUSTAIN AND INCREASE OUR
INTERNATIONAL SALES, WE MAY NOT ACHIEVE ANTICIPATED REVENUE GROWTH
Asia is a particularly important region for our business. Sales to
Taiwan, Japan and other Asian countries accounted for 59% of our total
net sales in 1999, 50% in 1998 and 60% in 1997. All international
sales accounted for 71% of our total net sales in 1999, 67% in 1998,
and 65% in 1997. We anticipate that international sales will continue
to account for a significant portion of our net sales. Because of our
dependence upon international sales in general and on sales to Taiwan,
Japan and other Asian countries in particular, we are at risk to the
effects of regional economic problems. Asian economies have been
highly volatile and prone to recession in recent years. In particular,
our 1998 net sales declined during a severe industry downturn caused
in large part by recessions in several Asian countries. Our
international sales are subject to a number of additional risks,
including: - unexpected changes in law or regulations resulting in
more burdensome governmental controls, tariffs, restrictions,
embargoes or export license requirements; - exchange rate volatility;
- political and economic instability, particularly in Asia; -
difficulties in accounts receivable collections; - extended payment
terms beyond those customarily used in the United States; -
difficulties in managing distributors or representatives; -
difficulties in staffing and managing foreign subsidiary operations;
and - potentially adverse tax consequences. Our sales to date have
been denominated in U.S. dollars. If it becomes necessary for us to
make sales denominated in foreign currencies, we will become more
exposed to the risk of currency fluctuations. Our products become less
price competitive in countries with currencies that are declining in
value in comparison to the dollar. This could cause us to lose sales
or force us to lower our prices, which would reduce our gross margins.
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WE HAVE ESTABLISHED A DIRECT SALES ORGANIZATION IN JAPAN AND
TERMINATED OUR JAPANESE DISTRIBUTOR, WHICH COULD RESULT IN LOST SALES
OR INCREASED RISKS TO OUR BUSINESS IN JAPAN
As part of our original strategy for penetrating the Japanese market,
we established a distributor relationship with Marubeni Solutions
Corp. in 1990. In 1999, we shifted our strategy in Japan to a direct
sales model. For the year ended December 31, 1998, sales to Marubeni
accounted for 16% of our net sales. We have terminated our
distribution relationship with Marubeni and established our own direct
sales force in Japan. For the year ended December 31, 1999, sales to
Marubeni accounted for 10% of our net sales. The transition to direct
sales was completed during the first half of 2000. Although we intend
to continue to invest significant resources in Japan, including the
hiring of additional personnel to support our direct sales effort, we
may not be able to maintain or increase our sales to the Japanese
semiconductor industry. We may miss sales opportunities or lose
competitive sales as we transition to this direct sales model, or
Japanese customers and potential customers may be unwilling to
purchase our systems from us directly. When we make sales directly to
customers in Japan, we expect that payment terms may be as long as 180
days from shipment, compared to 30 days from shipment for sales in our
other regions. Such a delay would negatively impact our cash flows.
MOST OF OUR SALES ARE CURRENTLY CONCENTRATED IN ASPEN STRIP AND CVD
SYSTEMS, AND WE DEPEND UPON CONTINUED MARKET ACCEPTANCE OF THESE
PRODUCTS; IF WE ARE UNABLE TO INCREASE SALES OF OUR OTHER PRODUCTS, WE
MAY NOT ACHIEVE ANTICIPATED GROWTH OF NET SALES
For the year ended December 31, 1999, sales of Aspen Strip and CVD
systems constituted 87% of our net sales. We expect that revenue from
these products will continue to account for a substantial majority of
our net sales for the foreseeable future. Accordingly, continued
market acceptance of these systems is critical to our future success.
Market acceptance of our Aspen Strip and CVD systems is affected by a
number of factors including technological innovation, productivity and
cost of ownership. Many of these factors are beyond our control. Our
failure to maintain or increase current levels of market acceptance
for Aspen Strip and CVD systems could significantly impair our net
sales growth. Our future sales will also depend upon achieving broad
market acceptance of our Aspen RTP systems, Aspen LiteEtch systems,
EpiPro systems and other future products and services that we might
offer. The markets for these newer products, especially products such
as our Aspen III Strip, Aspen III CVD and Aspen III LiteEtch, which
process 300 millimeter wafers, are still developing and require our
substantial investment in development and sales efforts. If the
markets for these products do not develop as anticipated, or if we are
unable to obtain or increase orders in these markets, we may not
realize an adequate return on the investment made in the development
of these new products, and we may not achieve our anticipated revenue
growth.
WE MAY NOT ACHIEVE ANTICIPATED REVENUE GROWTH IF WE ARE NOT SELECTED
AS "VENDOR OF CHOICE" FOR NEW OR EXPANDED FABRICATION FACILITIES AND
IF OUR SYSTEMS AND PRODUCTS DO NOT ACHIEVE BROADER MARKET ACCEPTANCE
Because semiconductor manufacturers must make a substantial investment
to install and integrate capital equipment into a semiconductor
fabrication facility, these manufacturers will tend to choose
semiconductor equipment manufacturers based on established
relationships, product compatibility and proven financial performance.
Once a semiconductor manufacturer selects a particular vendor's
capital equipment, the
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manufacturer generally relies for a significant period of time upon
equipment from this vendor of choice for the specific production line
application. In addition, the semiconductor manufacturer frequently
will attempt to consolidate its other capital equipment requirements
with the same vendor. Accordingly, we may face narrow windows of
opportunity to be selected as the "vendor of choice" by substantial
new customers. It may be difficult for us to sell to a particular
customer for a significant period of time once that customer selects a
competitor's product, and we may not be successful in obtaining
broader acceptance of our systems and technology. To date, only our
strip and CVD products have gained widespread market acceptance. If we
are unable to achieve broader market acceptance of our systems and
technology, we may be unable to grow our business and our operating
results and financial condition will be adversely affected.
UNLESS WE CAN CONTINUE TO DEVELOP AND INTRODUCE NEW SYSTEMS THAT
COMPETE EFFECTIVELY ON THE BASIS OF PRICE AND PERFORMANCE, WE MAY LOSE
FUTURE SALES AND CUSTOMERS, OUR BUSINESS MAY SUFFER AND OUR STOCK
PRICE MAY DECLINE
Because of continual changes in the markets in which we and our
customers compete, our future success will depend in part upon our
ability to continue to improve our systems and our technologies. These
markets are characterized by rapidly changing technology, evolving
industry standards and continuous improvements in products and
services. Due to the continual changes in these markets, our success
will also depend upon our ability to develop new technologies and
systems that compete effectively on the basis of price and performance
and that adequately address customer requirements. In addition, we
must adapt our systems and processes to technological changes and to
support emerging target market industry standards. The success of any
new systems we introduce is dependent on a number of factors. These
factors include timely completion of new system designs and market
acceptance. We may not be able to improve our existing systems or
develop new technologies or systems in a timely manner. In particular,
the transition of the market to 300 millimeter wafers will present us
with both an opportunity and a risk. To the extent that we are unable
to introduce 300 millimeter systems which meet customer requirements
on a timely basis, our business could be harmed.
WE MAY NOT BE ABLE TO CONTINUE TO SUCCESSFULLY COMPETE IN THE HIGHLY
COMPETITIVE SEMICONDUCTOR INDUSTRY
The semiconductor equipment industry is both highly competitive and
subject to rapid technological change. Significant competitive factors
include the following: - system performance; - cost of ownership; -
size of installed base; - breadth of product line; and - customer
support. The following characteristics of our major competitors'
systems give them a competitive advantage over us, particularly with
their CVD systems: - broader product lines; - longer operating
history; - greater experience with high volume manufacturing; -
broader name recognition; - substantially larger customer bases; and -
substantially greater financial, technical and marketing resources.
In addition, to expand our sales we must often replace the systems of
our competitors or sell new systems to customers of our competitors.
Our competitors may develop new or enhanced competitive products that
will offer price or performance features that are superior to our
systems. Our competitors may also be able to respond more quickly to
new or emerging technologies and changes in customer requirements, or
to devote greater resources to the development, promotion and sale of
their product lines. We may not be able to maintain or expand our
sales if competition increases and we are unable to respond
effectively.
WE DEPEND UPON A LIMITED NUMBER OF SUPPLIERS FOR MANY COMPONENTS AND
SUBASSEMBLIES, AND SUPPLY SHORTAGES OR THE
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LOSS OF THESE SUPPLIERS COULD RESULT IN INCREASED COST OR DELAYS IN
MANUFACTURE AND SALE OF OUR PRODUCTS
We rely to a substantial extent on outside vendors to manufacture many
of the components and subassemblies of our Aspen systems. We obtain
many of these components and subassemblies from a sole source or a
limited group of suppliers. Because of our reliance on outside vendors
generally, and on a sole or a limited group of suppliers in
particular, we may be unable to obtain an adequate supply of required
components. In addition, we may have reduced control over pricing and
timely delivery of components. In addition, we often quote prices to
our customers and accept customer orders for our products prior to
purchasing components and subassemblies from our suppliers. If our
suppliers increase the cost of components or subassemblies, we may not
have alternative sources of supply and may not be able to raise the
cost of the system being evaluated by our customers to cover all or
part of the increased cost of components. The manufacture of some of
these components and subassemblies is an extremely complex process and
requires long lead times. As a result, we have in the past and may in
the future experience delays or shortages. If we are unable to obtain
adequate and timely deliveries of our required components or
subassemblies, we may have to seek alternative sources of supply or
manufacture such components internally. This could delay our ability
to manufacture or timely ship our systems, causing us to lose sales,
incur additional costs, delay new product introductions and cause us
to suffer harm to our reputation.
TO EFFECTIVELY MANAGE OUR GROWTH AND EXPANSION, WE WILL NEED TO
IMPROVE AND IMPLEMENT NEW SYSTEMS, PROCEDURES AND CONTROLS
We have recently experienced a period of rapid growth and expansion
that has placed a significant strain on our management information
systems and our administrative, financial and operational resources.
We are currently undertaking a significant expansion of our operations
to support increased sales levels as a result of the recent
improvement in the semiconductor industry, including the expansion of
our international operations and a transition to direct sales
operations in Japan. We are making additional significant investments
in research and development to support product development. We have
grown from 349 employees at December 31, 1998, to 443 employees at
December 31, 1999 and to 590 employees at September 24, 2000 and plan
to further increase our total personnel. This expansion will continue
to result in substantial demands on our management resources. To
accommodate continued anticipated growth and expansion, we will be
required to: - improve existing, and implement new, operational and
financial systems, procedures and controls; - hire, train, manage,
retain and motivate qualified personnel; and - obtain additional
facilities and suppliers. These measures may place additional burdens
on our management and our internal resources.
IF WE DO NOT HAVE SUFFICIENT EVALUATION SYSTEMS AVAILABLE TO OUR
CUSTOMERS, WE MAY MISS SALES OPPORTUNITIES We have experienced
increased interest in evaluation of our chemical vapor deposition
products. In the past, during periods of high growth, we have been
constrained by a lack of available CVD evaluation units for timely
delivery to prospective customers. If we are not able to make a
sufficient number of evaluation systems available when requested,
potential customers may not be able to evaluate our products before
making equipment purchase decisions and we may miss opportunities to
make sales, causing our growth to be adversely affected.
WE ARE HIGHLY DEPENDENT ON OUR KEY PERSONNEL TO MANAGE OUR BUSINESS
AND THEIR KNOWLEDGE OF OUR BUSINESS, MANAGEMENT SKILLS AND TECHNICAL
EXPERTISE WOULD BE DIFFICULT TO REPLACE
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Our success depends to a large extent upon the efforts and abilities
of Brad Mattson, our chairman and chief executive officer, as well as
other key managerial and technical employees who would be difficult to
replace. The loss of Mr. Mattson or other key employees could limit or
delay our ability to develop new products and adapt existing products
to our customers' evolving requirements and result in lost sales and
diversion of management resources. None of our executive officers are
bound by a written employment agreement and our relationships with our
officers are at will.
BECAUSE OF COMPETITION FOR ADDITIONAL QUALIFIED PERSONNEL, WE MAY NOT
BE ABLE TO RECRUIT OR RETAIN NECESSARY PERSONNEL, WHICH COULD IMPEDE
DEVELOPMENT OR SALES OF OUR PRODUCTS
Our growth depends on our ability to attract and retain qualified,
experienced employees. There is substantial competition for
experienced engineering, technical, financial, sales and marketing
personnel in our industry. In particular, we must attract and retain
highly skilled design and process engineers. Competition for such
personnel is intense, particularly in the San Francisco Bay Area where
we are based. If we are unable to retain our existing key personnel,
or attract and retain additional qualified personnel, we may from time
to time experience inadequate levels of staffing to develop and market
our products and perform services for our customers. As a result, our
growth could be limited due to our lack of capacity to develop and
market our products to our customers, or we could fail to meet our
delivery commitments or experience deterioration in service levels or
decreased customer satisfaction.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY WE MAY LOSE A
VALUABLE ASSET, EXPERIENCE REDUCED MARKET SHARE OR INCUR COSTLY
LITIGATION TO PROTECT OUR PROPRIETARY TECHNOLOGY
We rely on a combination of patents, copyrights, trademark and trade
secret laws, non-disclosure agreements and other intellectual property
protection methods to protect our proprietary technology. Despite our
efforts to protect our intellectual property, our competitors may be
able to legitimately ascertain the non-patented proprietary technology
embedded in our systems. If this occurs, we may not be able to prevent
the use of such technology. Our means of protecting our proprietary
rights may not be adequate and our patents may not be sufficiently
broad to protect our technology. In addition, any patents issued to us
could be challenged, invalidated or circumvented and any rights
granted under the patent may not provide adequate protection to us.
Furthermore, we may not have sufficient resources to prosecute our
rights. Our competitors may independently develop similar technology,
duplicate our products or design around patents that may be issued to
us. In addition, the laws of some foreign countries may not protect
our proprietary rights to as great an extent as do the laws of the
United States and it may be more difficult to monitor the use of our
products. As a result of these threats to our proprietary technology,
we may have to resort to costly litigation to enforce our intellectual
property rights.
WE MIGHT FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT MAY BE
COSTLY TO RESOLVE AND COULD DIVERT MANAGEMENT ATTENTION
We may from time to time be subject to claims of infringement of other
parties' proprietary rights. Our involvement in any patent dispute or
other intellectual property dispute or action to protect trade
secrets, even if the claims are without merit, could be very expensive
to defend and could divert the attention of our management. Adverse
determinations in any litigation could subject us to significant
liabilities to third parties,
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require us to seek costly licenses from third parties and prevent us
from manufacturing and selling our systems. Any of these situations
could have a material adverse effect on our business and operating
results.
OUR FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD RESULT IN
SUBSTANTIAL LIABILITY TO US
We are subject to a variety of federal, state and local laws, rules
and regulations relating to environmental protection. These laws,
rules and regulations govern the use, storage, discharge and disposal
of hazardous chemicals during manufacturing, research and development
and sales demonstrations. If we fail to comply with present or future
regulations, we could be subject to substantial liability for clean up
efforts, personal injury and fines or suspension or cessation of our
operations. Restrictions on our ability to expand or continue to
operate our present locations could be imposed upon us or we could be
required to acquire costly remediation equipment or incur other
significant expenses.
THE PRICE OF OUR COMMON STOCK HAS FLUCTUATED IN THE PAST AND MAY
CONTINUE TO FLUCTUATE SIGNIFICANTLY IN THE FUTURE, WHICH MAY LEAD TO
LOSSES BY INVESTORS OR TO SECURITIES LITIGATION
The market price of our common stock has been highly volatile in the
past, and our stock price may decline in the future. We believe that a
number of factors could cause the price of our common stock to
fluctuate, perhaps substantially, including: - general conditions in
the semiconductor industry or in the worldwide economy; -
announcements of developments related to our business; - fluctuations
in our operating results and order levels; - announcements of
technological innovations by us or by our competitors; - new products
or product enhancements by us or by our competitors; - developments in
patents or other intellectual property rights; or - developments in
our relationships with our customers, distributors and suppliers. In
addition, in recent years the stock market in general, and the market
for shares of high technology stocks in particular, have experienced
extreme price fluctuations. These fluctuations have frequently been
unrelated to the operating performance of the affected companies. Such
fluctuations could adversely affect the market price of our common
stock. In the past, securities class action litigation has often been
instituted against a company following periods of volatility in the
company's stock price. This type of litigation, if filed against us,
could result in substantial costs and divert our management's
attention and resources.
ANY FUTURE BUSINESS ACQUISITIONS MAY DISRUPT OUR BUSINESS, DILUTE
STOCKHOLDER VALUE OR DISTRACT MANAGEMENT ATTENTION
As part of our business strategy, we may consider acquisitions of, or
significant investments in, businesses that offer products, services
and technologies complementary to ours. Such acquisitions could
materially adversely affect our operating results and/or the price of
our common stock. Acquisitions also entail numerous risks, including:
- difficulty of assimilating the operations, products and personnel of
the acquired businesses; - potential disruption of our ongoing
business; - unanticipated costs associated with the acquisition; -
inability of management to manage the financial and strategic position
of acquired or developed products, services and technologies; -
inability to maintain uniform standards, controls, policies and
procedures; and - impairment of relationships with employees and
customers which may occur as a result of integration of the acquired
business. To the extent that shares of our stock or other rights to
purchase stock are issued in connection with any future acquisitions,
dilution to our existing stockholders will result and our earnings per
share may suffer. Any future acquisitions may not generate additional
revenue or provide any benefit to our business, and we may not achieve
a satisfactory return on our investment in any acquired businesses.
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YEAR 2000 COMPLICATIONS MAY DISRUPT OUR OPERATIONS AND HARM OUR
BUSINESS
The date fields coded in many software products and computer systems
need to be able to distinguish 21st century dates from 20th century
dates, including leap year calculations. The failure to be able to
accurately distinguish these dates is commonly known as the year 2000
problem. While we have yet to experience year 2000 problems, the
computer software programs and operating systems used in our internal
operations, including our financial, product development, order
management and manufacturing systems, could experience errors or
interruptions due to the year 2000 problem. For example, a significant
failure of our computer integrated manufacturing systems, which
monitor and control factory equipment, could disrupt manufacturing
operations and cause a delay in completion and shipping of products.
In addition, it is possible that our suppliers' and service providers'
failure to adequately address the year 2000 problem could have an
adverse effect on their operations, which, in turn, could have an
adverse impact on us.
