1002047--6/26/2007--NETWORK_APPLIANCE

related topics

{customer, product, revenue}

{product, market, service}

{acquisition, growth, future}

{regulation, change, law}

{condition, economic, financial}

{cost, operation, labor}

{loss, insurance, financial}

{operation, natural, condition}

{personnel, key, retain}

{system, service, information}

{tax, income, asset}

{property, intellectual, protect}

{operation, international, foreign}

{stock, price, operating}

The marketplace for our common stock has fluctuated significantly in the past and will likely continue to do so in the future. Our forecasts of our revenues and earnings outlook may be inaccurate and could materially and adversely impact our business or our planned results of operations. If we are unable to develop and introduce new products and respond to technological change, if our new products do not achieve market acceptance, or if we fail to manage the transition between our new and old products, or if we cannot provide the level of service and support for our new products, our operating results could be materially and adversely affected. An increase in competition could materially and adversely affect our operating results. We rely on a limited number of suppliers, and any disruption or termination of these supply arrangements could delay shipment of our products and could materially and adversely affect our operating results. The loss of any contract manufacturers or the failure to accurately forecast demand for our products or successfully manage our relationships with our contract manufacturers could negatively impact our ability to manufacture and sell our products. Our future financial performance depends on growth in the storage and data management markets. If these markets do not continue to grow at the rates at which we forecast growth, our operating results will be materially and adversely impacted. We are also exposed to unfavorable economic and market conditions and the uncertain geopolitical environment. Our gross margins may vary based on the configuration of our product and service solutions, and such variation may make it more difficult to forecast our earnings. Our effective tax rate may increase or fluctuate, which could increase our income tax expense and reduce our net income. We may face increased risks and uncertainties related to our current or future acquisitions and nonmarketable securities, and these investments may not achieve our objectives. We cannot assure you that our OEM relationship with IBM will generate significant revenue. If we are unable to maintain our existing relationships and develop new relationships with major strategic partners, our revenue may be impacted negatively. We cannot assure you that we are able to maintain existing resellers and attract new resellers, and that channel conflicts will not materially adversely affect our channel relationships. In addition, we do not have exclusive relationships with our resellers and accordingly there is a risk that those resellers may give higher priority to products of other suppliers, which could materially adversely affect our operating results. Risks inherent in our international operations could have a material adverse effect on our operating results. If we fail to manage our expanding business effectively, our operating results could be materially and adversely affected. As we continue to grow our business, we are likely to incur costs earlier than some of the anticipated benefits, which could harm our operating results. A significant percentage of our expenses are fixed, which could materially and adversely affect our net income. We depend on the ability of our personnel, raw materials, equipment, and products to move reasonably unimpeded around the world. Our business could be materially and adversely affected as a result of a natural disaster, terrorist acts, or other catastrophic events. We depend on attracting and retaining qualified technical and sales personnel. If we are unable to attract and retain such personnel, our operating results could be materially and adversely impacted. Undetected software errors, hardware errors, or failures found in new products may result in loss of or delay in market acceptance of our products, which could increase our costs and reduce our revenues. Product quality problems could lead to reduced revenue, gross margins, and net income. We are exposed to various risks related to legal proceedings or claims and protection of intellectual property rights, which could adversely affect our operating results. Our business is subject to increasingly complex corporate governance, public disclosure, accounting, and tax requirements that have increased both our costs and the risk of noncompliance. Our ability to forecast earnings is limited by the impact of new accounting requirements such as SFAS No. 123R. The U.S. government has contributed to our revenue growth and has become an important customer for us.

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1002047--6/26/2007--NETWORK_APPLIANCE_INC